We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Target for Average Pension Pot growth

Options
245

Comments

  • dunstonh
    dunstonh Posts: 119,646 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    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).

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • barnstar2077
    barnstar2077 Posts: 1,648 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    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.
    Think first of your goal, then make it happen!
  • bamgbost
    bamgbost Posts: 482 Forumite
    Part of the Furniture 100 Posts Photogenic Name Dropper
    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...!
    365 Day 1p challenge - £371.49 / 667.95
    Emergency Fund   £1000 / £1000 ( will enlarge once debts are cleared)
    DFW - £TBC
  • dunstonh
    dunstonh Posts: 119,646 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    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.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Albermarle
    Albermarle Posts: 27,820 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    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
    Bostonerimus1 Posts: 1,403 Forumite
    1,000 Posts Second Anniversary Name Dropper
    edited 15 August 2024 at 4:47PM
    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.
    And so we beat on, boats against the current, borne back ceaselessly into the past.
  • Hoenir
    Hoenir Posts: 7,742 Forumite
    1,000 Posts First Anniversary Name Dropper
    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
    Triumph13 Posts: 1,962 Forumite
    Part of the Furniture 1,000 Posts Name Dropper I've been Money Tipped!
    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
    Bostonerimus1 Posts: 1,403 Forumite
    1,000 Posts Second Anniversary Name Dropper
    edited 16 August 2024 at 1:11AM
    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.
    And so we beat on, boats against the current, borne back ceaselessly into the past.
  • bamgbost
    bamgbost Posts: 482 Forumite
    Part of the Furniture 100 Posts Photogenic Name Dropper
    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....


    365 Day 1p challenge - £371.49 / 667.95
    Emergency Fund   £1000 / £1000 ( will enlarge once debts are cleared)
    DFW - £TBC
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.9K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.9K Work, Benefits & Business
  • 598.8K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.