Pension Drops.

Albermarle

Strummer22 said:

almost-bankrupt said:

Hi - I'm a nervous person when it comes to money, probably because I grew up in abject poverty. My accountant recommended I finally open a pension as a good way of getting money from my LTD company for the future.
My financial advisor recommended True Potential, the low risk pension category to start with, so i brought over 60k from my company to get it going. In the space of 2-3 weeks it's just dropped every day, and now it's around minus £500. This makes me very nervous. My advisor just tells me its 'futile' to check before the end of the next year, and doesn't seem to answer my questions on the workings of it all, and how I'm supposed make money on such a thing.

So my question is - is this normal or is it a poor starting pension with not much hope. I'm thinking about taking the money back out and investing in something more tangible like property.

Thanks in advance for your experiences.

Not sure if anyone has addressed this yet, BUT:

I hope you are planning to continue investing regularly! Monthly is typical. 

Two reasons I mention this:
1. if you expect your £60k to grow into a pot you can retire on, you'll be disappointed. 
2. buying once means you only have a chance to buy at a single price.
      a) Global equities recently approached or exceeded record highs, so you bought the market high. This is not a terrible thing to do; you never know whether it's better to buy now or wait (except in hindsight) so you might as well buy now. However, the markets have reacted as you might expect to Israel and Iran having a game of slaps/starting WWIII (delete as appropriate). Most people will have seen their pension funds drop in value. The only people who could lose out significantly as a result are those about to take a 25% tax free lump sum. Everyone else should just ignore the noise.
     b) Furthermore, if you invest more money now, you'll be able to get the same investments at a cheaper price - so when the market rises again you'll end up better off. 

However, the markets have reacted as you might expect to Israel and Iran having a game of slaps/starting WWIII 

Personally I would thing the dropback was as much about the recent sustained growth could not continue for ever, and the FED indication that interest rate drops could be a long time off yet.
The markets are often less driven by external global events than people think, but they can have an effect of course.

CrickJon

almost-bankrupt said:

Hi - I'm a nervous person when it comes to money, probably because I grew up in abject poverty. My accountant recommended I finally open a pension as a good way of getting money from my LTD company for the future.
My financial advisor recommended True Potential, the low risk pension category to start with, so i brought over 60k from my company to get it going. In the space of 2-3 weeks it's just dropped every day, and now it's around minus £500. This makes me very nervous. My advisor just tells me its 'futile' to check before the end of the next year, and doesn't seem to answer my questions on the workings of it all, and how I'm supposed make money on such a thing.

So my question is - is this normal or is it a poor starting pension with not much hope. I'm thinking about taking the money back out and investing in something more tangible like property.

Thanks in advance for your experiences.

I've lost £5k on my pension pot this week.

Doesn't concern me in the slightest, I won't be needing it for another 9-10 years.

kimwp

My pension (ignoring the contributions) seems to have gone
2019-20: down 23%
2020-21: up 35%
2021-22: up 6%
2022-23: down 0.8%
2023-24: up 25%

Brilley

True Potential are not the best. We have been with them for a while and made very little. The best we ever did was 4%....currently overall since we started are around 1.5% (medium risk)...ie, well down when inflation is factored in...

joep2

My pension fund and s&s isa are both hemorrhaging badly past week, wiping out all gains this year. I too am starting to think the whole thing is a scam.

Hoenir

almost-bankrupt said:

kimwp said:

What  I've asked my advisor to explain (waiting for an answer still) is - once my pot gets above 60k again, what will TP do with the additional funds - do they re-invest in other stocks, does it earn interest, or does the whole thing just go up and down for ever and I hope for the best that its in on an upward curve once I come to need it ?

When you put money in, it is used to buy shares. As those shares go up and down in value, your pension goes up and down in value.

You don't earn interest. If the value goes up, you don't now have excess money to buy other stocks, you just have the same amount of stock as you initially bought, but each is worth more than when you bought them.

This is exactly what I was wondering about - so why are people saying that over time it will gradually increase if these shares can just go up and down at any time ? 

Many companies pay dividends. These are the distribution of some of the profit made by the company to it's shareholders. As in effect by owning a company's shares you are lending the company money for nothing.  The dividend is the payback.  These dividends are then reinvested to buy more shares. So and so on. Over time the compounding effect gets bigger and bigger. As a basic example. If you were to invest  £1,000 at a 4% yield compound over 25 years it would grow to £2.665.  

dunstonh

joep2 said:

My pension fund and s&s isa are both hemorrhaging badly past week, wiping out all gains this year. I too am starting to think the whole thing is a scam.

Bizarre thing to say.

Equities have doubled in the last 7 years, even with the last week.    

What are you invested in that is "haemorrhaging"?        The general markets are not.  Although some focused areas of the market have been hit harder than others, as is often the case during short term drops.

Linton

almost-bankrupt said:

kimwp said:

What  I've asked my advisor to explain (waiting for an answer still) is - once my pot gets above 60k again, what will TP do with the additional funds - do they re-invest in other stocks, does it earn interest, or does the whole thing just go up and down for ever and I hope for the best that its in on an upward curve once I come to need it ?

When you put money in, it is used to buy shares. As those shares go up and down in value, your pension goes up and down in value.

You don't earn interest. If the value goes up, you don't now have excess money to buy other stocks, you just have the same amount of stock as you initially bought, but each is worth more than when you bought them.

This is exactly what I was wondering about - so why are people saying that over time it will gradually increase if these shares can just go up and down at any time ? 

1) historic data shows ups are more frequent than downs.
2)  Increasing share prices are ultinately dependent on company profits.  If most/all companies are not profitable  the world economy would collapse and the loss of your savings would be a minor inconvenience compared with your other problems.

Albermarle

joep2 said:

My pension fund and s&s isa are both hemorrhaging badly past week, wiping out all gains this year. I too am starting to think the whole thing is a scam.

If it was a scam, all your money would have disappeared never to be seen again.

If we look at a typical medium risk 60/40 fund such as is often is similar to a default fund for a pension fund.
Over the last
5 years + 25 %
1 years + 8%
3 months + 3 %
YTD + 2% 


Something more racy, may have fell back recently, but over the last 5 years would have gone up a lot more.

Beddie

Nothing to worry about. Keep doing regular monthly contributions, as you then buy more units when they drop in value.
Many of us do worry a little when our investments fall, but know we shouldn't even be looking at them on a weekly/monthly basis, never mind worrying about them. It's just human nature, because we worked hard for that money and don't like to see it drop. Patience is the key here - look at your pensions in 5 years and you should have done pretty well, but no guarantees.