Views on this pension fund?

Early_Retire_Free

5 years ago I commuted a small defined benefit pension fund to prudential (using an advisor).  Since then I have removed the advisor and left the funds sit as they are.

The investments are held in a fund called the "PruFund Growth Fund Series E" and while I like the inbuilt diversity of the investment, I don't like the charges.

I have contemplated transferring to a SIPP to reduce the latter but might find it difficult to replicate the mix and I certaintly don't want to add additional risk as its a reasonable sum of money (£0.5 million).

This isn't our only retirement plan and our day to day needs are met from other sources.

Any thoughts?

Dazed_and_C0nfused

Early_Retire_Free said:

5 years ago I commuted a small defined benefit pension fund to prudential (using an advisor).  Since then I have removed the advisor and left the funds sit as they are.

The investments are held in a fund called the "PruFund Growth Fund Series E" and while I like the inbuilt diversity of the investment, I don't like the charges.

I have contemplated transferring to a SIPP to reduce the latter but might find it difficult to replicate the mix and I certaintly don't want to add additional risk as its a reasonable sum of money (£0.5 million).

This isn't our only retirement plan and our day to day needs are met from other sources.

Any thoughts?

What was the CETV of the small defined benefit pension when it was transferred to Pru?

If it's now worth £500k then maybe the performance makes the charges worthwhile!

Early_Retire_Free

Dazed_and_C0nfused said:

What was the CETV of the small defined benefit pension when it was transferred to Pru?

If it's now worth £500k then maybe the performance makes the charges worthwhile!

I meant "small" as in the annual value (was c. £12,000 pa if memory serves me correctly), The amount transferred in was just under £400k so annual CAGR is around 5%.

JoeCrystal

In other words, it is barely keeping its value in today's term after the returns. £400k five years ago is almost £500k in today's money.

dunstonh

I have contemplated transferring to a SIPP to reduce the latter but might find it difficult to replicate the mix and I certaintly don't want to add additional risk as its a reasonable sum of money (£0.5 million).

You wouldn't want to replicate the mix.      Funds which are a portfolio within the fund change the mix.   If you replicate it then you are just doing it on a snapshot.

The investments are held in a fund called the "PruFund Growth Fund Series E" and while I like the inbuilt diversity of the investment, I don't like the charges.

I dislike it and all I do is take people out of it.  For some firms, it was their go to option for everyone.   For me, it is a niche option that suits a tiny minority.   When you actually explain how things work and the extra costs go towards the smoothing which actually tends to lag reality and you end up in similar position in the end anyway, they soon realise that there is no point paying those extra charges.

Perhaps its really only suitable for those daft people that check their values daily and would make bad decisions based on normal daily movements.

Any thoughts?

Don't try and copy someone else's asset allocation that is built for a specific objective that may or may not be suitable for you.  You would need to rebalance and adjust frequently using data you don't have access to and are trying to follow a model that is built with smoothing in mind when smoothing doesn't apply to you.

Early_Retire_Free

dunstonh said:

I have contemplated transferring to a SIPP to reduce the latter but might find it difficult to replicate the mix and I certaintly don't want to add additional risk as its a reasonable sum of money (£0.5 million).

You wouldn't want to replicate the mix.      Funds which are a portfolio within the fund change the mix.   If you replicate it then you are just doing it on a snapshot.

Fair comment, I chose my words poorly.  I meant rather putting the money into a fund which has a predetermined asset allocation but much lower fees (e.g. One of the Vanguard life stratregy funds)

The investments are held in a fund called the "PruFund Growth Fund Series E" and while I like the inbuilt diversity of the investment, I don't like the charges.

I dislike it and all I do is take people out of it.  For some firms, it was their go to option for everyone.   For me, it is a niche option that suits a tiny minority.   

When you actually explain how things work and the extra costs go towards the smoothing which actually tends to lag reality and you end up in similar position in the end anyway, they soon realise that there is no point paying those extra charges.

Agree - that is my concern

Perhaps its really only suitable for those daft people that check their values daily and would make bad decisions based on normal daily movements.

I look at values on this probably quarterly.  My target for this fund is (probably) never to take it and most likely it will pass to my heirs.

So the key question that remains is what are the alternatives I could consider? - given that this investments represents less than 20% of our investments with the remaining portfolio split roughly 50:50 between investments (shares, bonds etc) and cash deposits. 

Thanks for taking the time to respond.

Pat38493

Early_Retire_Free said:

dunstonh said:

I have contemplated transferring to a SIPP to reduce the latter but might find it difficult to replicate the mix and I certaintly don't want to add additional risk as its a reasonable sum of money (£0.5 million).

You wouldn't want to replicate the mix.      Funds which are a portfolio within the fund change the mix.   If you replicate it then you are just doing it on a snapshot.

Fair comment, I chose my words poorly.  I meant rather putting the money into a fund which has a predetermined asset allocation but much lower fees (e.g. One of the Vanguard life stratregy funds)

The investments are held in a fund called the "PruFund Growth Fund Series E" and while I like the inbuilt diversity of the investment, I don't like the charges.

I dislike it and all I do is take people out of it.  For some firms, it was their go to option for everyone.   For me, it is a niche option that suits a tiny minority.   

When you actually explain how things work and the extra costs go towards the smoothing which actually tends to lag reality and you end up in similar position in the end anyway, they soon realise that there is no point paying those extra charges.

Agree - that is my concern

Perhaps its really only suitable for those daft people that check their values daily and would make bad decisions based on normal daily movements.

I look at values on this probably quarterly.  My target for this fund is (probably) never to take it and most likely it will pass to my heirs.

So the key question that remains is what are the alternatives I could consider? - given that this investments represents less than 20% of our investments with the remaining portfolio split roughly 50:50 between investments (shares, bonds etc) and cash deposits. 

Thanks for taking the time to respond.

If you are already covered for most or all of your needs, and you don't plan to draw on this money anytime soon, one option might be to invest it in an global equity tracker fund.

Linton

This seems bizarre.  You presumably paid an IFA a large amount of money to come up with a solution that met your specific circumstances, needs and risk acceptance.  If the IFA made an inappropriate choice you could sue them.

You are  now proposing to move to a different solution elsewhere asking for advice or suggestions from an unknown group of people who know virtually nothing about you and your circumstances.  Should their proposals be wrong you have no come-back.

Clear one thing up first.  You wont be able to duplicate the PruFund in any way.  The PruFund is designed to smooth market fluctuations by saving excess gains during the good times to spend later in decreasing the effect of the bad times.  The underlying portfolio could well change over time.

Now we can see how this operates.  I have plotted the last 5 years performance of the Prufund Growth Series E Pension fund against that of the Vanguard Life Strategy 40 and 60 which could be suggested as alternatives:



Given the size of your portfolio I suggest either
1) Leave things as they are
2) or Engage with a local IFA
3) More education

Early_Retire_Free

Linton said:

This seems bizarre.  You presumably paid an IFA a large amount of money to come up with a solution that met your specific circumstances, needs and risk acceptance.  If the IFA made an inappropriate choice you could sue them.

You are  now proposing to move to a different solution elsewhere asking for advice or suggestions from an unknown group of people who know virtually nothing about you and your circumstances.  Should their proposals be wrong you have no come-back.

Clear one thing up first.  You wont be able to duplicate the PruFund in any way.  The PruFund is designed to smooth market fluctuations by saving excess gains during the good times to spend later in decreasing the effect of the bad times.  The underlying portfolio could well change over time.

Now we can see how this operates.  I have plotted the last 5 years performance of the Prufund Growth Series E Pension fund against that of the Vanguard Life Strategy 40 and 60 which could be suggested as alternatives:



Given the size of your portfolio I suggest either
1) Leave things as they are
2) or Engage with a local IFA
3) More education

Thanks - thats very helpful.

You raise some good points but I have always founds "attitude to risk assessments" somewhat vague and we probably sit somewhere in the middle of a very broad spectrum of possible strategies i.e. we'd like our investments to go up (of course) but would prefer to avoid big downward swings.  For that reason, our default, which applies to the rest of our portfolio is a spread of investments across bonds and equities with a mix of geographies, sectors and fund types.  That might seem a little scattergun but if there is no specific objective then its difficult to compose a strategy that meets it!

I am comforted that the chart shows performance is at least keeping up with one of the potential alternatives.

dunstonh

You raise some good points but I have always founds "attitude to risk assessments" somewhat vague and we probably sit somewhere in the middle of a very broad spectrum of possible strategies 

That is the case.  It is why the FCA don't allow advisers to rely on them and require further questioning.  They are a starting point in the conversation.

I am comforted that the chart shows performance is at least keeping up with one of the potential alternatives.

The OEIC version of VLS has home bias.   Pru also has home bias.  So, that explains some of the similarity.  Home bias has been a drag for most of the last 15 years but of late that home bias has been more favourable.  For the first time in a long time, HSBC GS has dropped below the VLS OEIC - although both are below the VLS version without home bias)