Target for Average Pension Pot growth

dunstonh

Thanks all, sounds like we all just wanna beat inflation. hopefully by 2%+ is ideal. thanks!

How do you know its ideal if you haven't mentioned the assets?

If you have greater than 60% equities than inflation plus 2% is viable.   However, if you have less than that, then it would not be suitable.   e.g. 20% equities should just use inflation.  0% equities should use inflation minus 1%  (figures are a guide as opinions vary).

barnstar2077

As you have a long way to go, just make sure you are invested in a globally diverse 100% equities fund.

Don't just invest the default amount if you are able.  Even just putting in an extra five percent could knock years off of your working life, which you will be very grateful for as you get older!

Then enjoy life and let it take care of itself.  It will go up and down, but you are in it for the long game.

I model a 5% return before inflation personally, but when you are so far out it isn't going to give you a very accurate picture.  Worth it for motivation though, my pot has tripled in a pretty short space of time, because of gains and me putting a lot more in.  Which I still find a bit crazy tbh.

bamgbost

Yes the default funds tend to be 25% Equities. So defo need to look at changing this to something a bit more adventurous with higher equities i reckon...!

dunstonh

bamgbost said:

Yes the default funds tend to be 25% Equities. So defo need to look at changing this to something a bit more adventurous with higher equities i reckon...!

So, 25% equities would mean inflation plus 2% would not be a suitable projection assumption.

Albermarle

bamgbost said:

Yes the default funds tend to be 25% Equities. So defo need to look at changing this to something a bit more adventurous with higher equities i reckon...!

That seems low. Some of the default funds that are lifestyled will reduce equity content as you near retirement, but normally at your age it would be more in the 70% to 60% range. So yours seems a bit odd unless you have misread the info? Did you maybe tell them at some stage you only wanted low risk funds?

As you have a long way to go, just make sure you are invested in a globally diverse 100% equities fund.

This is not bad advice from a rational point of view, but these funds can be very volatile in the short term.
If you are likely to panic and pull out if it dropped 30 % or more, then you would be better with something a bit less racy.

Bostonerimus1

bamgbost said:

Yes the default funds tend to be 25% Equities. So defo need to look at changing this to something a bit more adventurous with higher equities i reckon...!

Default for whom? Even for a retiree 25% equities is low and for someone in the accumulation phase such a portfolio would probably be a disaster as it would not produce the growth necessary for many retirement scenarios.

Hoenir

bamgbost said:

Yes the default funds tend to be 25% Equities. So defo need to look at changing this to something a bit more adventurous with higher equities i reckon...!

That doesn't right unless you are close to retirement. % invested in equities is reduced to lower the exposure to volatility. Bonds for all their perceived faults. Do  provide the comfort of guaranteed returns. Whatever the weather. 

Triumph13

As others have said, there's no right answer.  I personally used 4% real for equities pre-retirement and 3.5% for post retirement.  The drop doesn't represent any change in asset allocation, just the fact that I could delay my retirement if they underperformed.

Bostonerimus1

Triumph13 said:

As others have said, there's no right answer.  I personally used 4% real for equities pre-retirement and 3.5% for post retirement.  The drop doesn't represent any change in asset allocation, just the fact that I could delay my retirement if they underperformed.

I think the OP would be interested in your asset allocation to help them understand its influence on expected returns.

For most of my time spent investing for retirement I was hoping for a 6% annual average return (so a few percent above inflation) and had around 60% equities and 40% bonds. Luckily from the early 1990s to 2014 that produced an 8% average annual return and I kept almost all of that as I did not pay an advisor and my funds fees were very low as I used index trackers. That's just one portfolio and one period spent investing, but to beat inflation by a few percent you will almost certainly need the growth potential of a relatively high equity allocation, but there is no guarantee.

bamgbost

I had to go double check... and correction its 40% Equities not 25%, even still. The default fund sounds low on equities based on the advise given.
Its an L&G default fund... called. ...L&G PMC Multi-Asset Fund 3. Heres a snapshot of it....