Is Your SIPP Pension Making Any Money?

Roger175

mad1_2 said:

Thanks Roger - I'm looking to drawdown when I'm 67, not buy an annuity. On your DIY platform, presumably you are making the decisions on where your pension is invested?

Yes, I am somewhat unusually invested. I have a portfolio of high yield shares (a basket of 30 or so individual companies), which sits alongside a number of funds (a bit of a ragtag mixture!, which I'm gradually rationalising to low cost trackers). I also have a sizable chunk currently in a short term money market account, but that's because I did some recent transfers which came over as cash and I don't want to invest it all in one go.

I visit my account every few days to check on things and reinvest the dividends received on the shares (actually, I tend to allow these to build-up to a sensible sum before buying more shares, in order to keep the costs down).

I wouldn't necessarily recommend anyone buys individual shares (unless you enjoy the 'fun', which I happen to do), but choosing a small number of low cost funds is not too taxing, there's some great pointers on this site.

LHW99

I switched my pension to them in early February 2023 as I wanted to combine my pensions into one pot and my existing provider didn't want to help.

Just one point - when you transfer a DC pension, you need to decide who you want to move it to, and ask the new company to deal with the transfer. That maybe why the existing company wasn't very forthcoming.

leosayer

mad1_2 said:

gravel_2 said:

What are you invested in?

Thanks Gravel 2 - below is a breakdown:

Asia Pac (inc Japan) Equity £20,640.36 11.41%

Cash £8,012.78 4.43%

Emerging Markets Equity £803.88 0.44%

European Equity £15,119.38 8.36%

Global Bond (Ex UK) £49,663.33 27.44%

Other £11,175.77 6.18%

Property £933.10 0.52%

UK Equity £27,262.02 15.07%

UK Government Bonds £19,065.59 10.54%

UK Index Linked Bonds £1,078.77 0.60%

US Equity £27,202.79 15.03%

That's pretty much a 50/50 portfolio ie. 50% in equities (company shares) and 50% in bonds and cash which is normal for a low/medium risk portfolio.

However the following may help to explain the relatively poor performance:
- 15% in US equities is low given that US listed companies represent around 60% of global market capitalisation 
- Likewise, 15% in UK equities is very high given that UK companies represent only 4% of global market capitalisation 

So you've missed out largely on the performance of US stocks (apple, alphabet, meta, nvidia etc). The S&P 500 index is up around 22% since Feb 2022. 

MK62

Don't forget the effect the sterling exchange rate.......it's strengthened about 7% against the USD since Feb 23, effectively devaluing US investments held by UK investors by that amount.......in other words, any US investments needed to make the same 7% just to break even over that period.

Similar story with other currencies, just different numbers.......eg Euro (5%)

Bianchiintenso

Like the others mine is up 8% since I self invested in December last year, I keep it as simple as possible, just 2 funds With AJBell. 

Bostonerimus1

OP it's impossible to comment on your pension's performance because you haven't told us how it is invested. But I would not be happy with the performance you quote, even for a very low risk portfolio, heck you can get more in a saving account.

I've been very happy with the recent performance of my self managed portfolio of retirement and general accounts as over the period from Feb 2023 to now they are up 24% with an annualized return of 17%. But I have a risky portfolio and I expect to give some of those gains back at some point and if you'd asked about a different time period I might well have lost money. I invest in basically three Vanguard funds in the USA (I live there); US Equity Index, Total International Stock Index and Wellesley multi-asset income fund.

sgx2000

Dunstonh
As per usual, an excellent answer.....

JohnWinder

If you're taking first steps to understanding your investments I'd say your asset mix isn't terrible. Important to remember that start and end dates used for calculating returns can have a big effect; a 2% fall on one day at the start or end can change a 10% return into 12% or 8% if you change the start or end date by one day. We also have no idea what effect fees had on your return. While your assets don't seem to have done well recently they might do better than the rest of our mixes over the next six months. Short time periods are like that.

We don't know how 'smart' you are with personal investing, but you can judge by scanning the contents or reading sections in 'google books' of Tim Hale's book Smarter Investing. You'll then know of you should borrow it from your local library, as it will put you on an equal footing with your adviser.

Although the performance of your portfolio over a short period should not be used to judge it there are bits to question.

How does it help you to have <1% in property or index linked bonds? Diversification of assets is good, but those assets can do better than the others by only 1-15%/year for a short time. A 15% outperformance by property would boost your returns by < one hundredth of that ie 0.15%/year. If you were managing your own investments you simply wouldn't bother, so ask yourself and your adviser why they chose those for you. If you can find a reason other than it makes investing look too complicated for anyone but a professional, report back and tell us. And if you can't get a cogent reason, you've taken one step towards doing better yourself.

You also ought to be familiar with all the fees you're paying, directly and indirectly in fund management fees, and reduce those you can. Over the short term it's less important, but compounding means that if you're investing for another twenty years which you might be, fees are very important.

Ibrahim5

Your financial advisers will have done well. Charged you a few thousand for a few minutes work. They will have had to buy a dice as well to decide where to invest the money.

mad1_2

JohnWinder said:

If you're taking first steps to understanding your investments I'd say your asset mix isn't terrible. Important to remember that start and end dates used for calculating returns can have a big effect; a 2% fall on one day at the start or end can change a 10% return into 12% or 8% if you change the start or end date by one day. We also have no idea what effect fees had on your return. While your assets don't seem to have done well recently they might do better than the rest of our mixes over the next six months. Short time periods are like that.

We don't know how 'smart' you are with personal investing, but you can judge by scanning the contents or reading sections in 'google books' of Tim Hale's book Smarter Investing. You'll then know of you should borrow it from your local library, as it will put you on an equal footing with your adviser.

Although the performance of your portfolio over a short period should not be used to judge it there are bits to question.

How does it help you to have <1% in property or index linked bonds? Diversification of assets is good, but those assets can do better than the others by only 1-15%/year for a short time. A 15% outperformance by property would boost your returns by < one hundredth of that ie 0.15%/year. If you were managing your own investments you simply wouldn't bother, so ask yourself and your adviser why they chose those for you. If you can find a reason other than it makes investing look too complicated for anyone but a professional, report back and tell us. And if you can't get a cogent reason, you've taken one step towards doing better yourself.

You also ought to be familiar with all the fees you're paying, directly and indirectly in fund management fees, and reduce those you can. Over the short term it's less important, but compounding means that if you're investing for another twenty years which you might be, fees are very important.

Thank you all for your comments - and to JohnWinder for a very helpful post.

I am currently paying a total annual charge of 1.93% to the financial advisors' company who invest my pension. This includes the use of the Quilter platform and their own fees.

I am not in any way 'smart' and would not consider investing my own pension. I am in awe of those who do this, but I think I would do more harm than good to my pension pot.

JohnWinder  I will ask the question about property and index linked bonds - thank you for pointing this out.

Just to clarify - I am not necessarily 'judging' the performance of my pension over such a short period of time. I am looking for a benchmark with others experience over this same time period. I am concerned that my pension has not grown at all over this time period and at some periods it was actually in a negative balance.

Thanks to all for your help so far.