Target for Average Pension Pot growth

bamgbost

Will spend the weekend, looking at other fund options. and divide my investment, into better spread of equities, etc. But appreciate the advice.

Like i previously said, i suspected something was wrong....most of my contribution over the last 4 years has done almost nothing (under 8% growth)!!

JoeCrystal

Here is the factsheet of the fund that the OP referred to 

https://fundcentres.lgim.com/srp/lit/mQn6LQ/Fact-Sheet_Multi-Asset-Fund-LG-PMC-Multi-Asset-Fund-3_30-06-2024.pdf

barnstar2077

bamgbost said:

Will spend the weekend, looking at other fund options. and divide my investment, into better spread of equities, etc. But appreciate the advice.

Like i previously said, i suspected something was wrong....most of my contribution over the last 4 years has done almost nothing (under 8% growth)!!

At your age I don't think that dividing your pot up would be helpful.  Find one good globally diverse fund with at least 80% equities and put everything in it, current and new funds alike.

JohnWinder

‘as I review my pension portfolio, what is a satisfactory growth rate, on average? Any thoughts? ‘

A lot hinges on ‘satisfactory’, and I’d endorse what’s been said about a satisfactory investment growth rate gets you to your goal. If that rate won’t do it, then you can save more or take more risk with your investments. The latter won’t guarantee better growth, but it’s pretty much necessary to achieve more growth; the trick is to not go beyond your comfort level with risk, lest you get spooked into a bad move if there’s too much downward direction in the volatility of your assets’ values.
But here’s another way to look at ‘satisfactory’: if you’re happy with a certain level of risk, then the only satisfactory returns are those that can readily be achieved with that level of risk. If you’re getting lower returns from your, or any, investment than the returns of the markets you’re invested in, then your growth rate is not satisfactory because you can easily make changes to get the returns available without taking more risk.
Without saying your LG fund is giving satisfactory returns or not, we can see that it is not invested to reflect the markets it invests in; eg, it holds similar amounts of US and emerging markets equities. This does not reflect the relative size of the equity market your fund is investing in. Your fund manager has decided EM stocks are going to do better than US stocks. They haven’t in recent years and this will partly explain your fund’s returns. Your fund manager has chosen to actively apportion the fund’s capital in a way that does not reflect the market accurately; this is more often a losing strategy (for you) than a winning one. You’ve taken a certain risk with the equities in your fund, and a satisfactory return was available with an index tracking investment approach; satisfactory in the sense that it was all the market had to offer for that level of risk you took. By contrast your fund manager has tried for more but might have got less - unsatisfactory.

Albermarle

bamgbost said:

Will spend the weekend, looking at other fund options. and divide my investment, into better spread of equities, etc. But appreciate the advice.

Like i previously said, i suspected something was wrong....most of my contribution over the last 4 years has done almost nothing (under 8% growth)!!

There could be a range of these Multi asset funds available in your pension, not just '3' . Some will be higher in equities maybe.

Bostonerimus1

bamgbost said:

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....

IMO those equity percentages are bizarre and the 40% equity total is quite "conservative" and not what I'd choose in the accumulation phase.

gm0

People vary.  

Saving at 40% equities rather than 100% is clearly a mugs game *if* you believe that equity markets on average give you more returns - for the additional risk taken - than bonds - ever can or will. And feel ready to deal with the volatility and "losses" along the way.  True.  Over the long term.  Over 30-40 years accumulation and 40 years drawdown - a bet many of us - have taken.  Buying drip drip drip through all the volatility.  Yum Yum. I was a 100% equities saver.  I am a 70-80% deaccumulator.

Someone riding into town 1900-1930 retiring into the crash - would perhaps have not been quite as sanguine.
The stockmarket as a 100% investment can and has delivered a close to 90% drawdown (1929-30s era).  And many smaller ones since of the 50% level. I have personally had a pension statement with a ~50% loss since last year on it. (100% equities).  Which came back up in a sensible time frame for me - this particular time.  So it felt bad.  But boy those units were cheaper to buy for a bit.

A 40% fund is at the cautious end of life.  And it has suffered from the bond drawdown in the recent couple of years due to the inflation/interest rates rapid spike.  Switching out now due to recent past performance is a good way to lock in those losses and perhaps run strauight into a 30-50% equities valuation correction.   With a new set of losses - perhaps 2x what would happen with the current fund. Would you be happy then - or would you change the risk dial down again - and lock in those losses.  Bad for your wealth.  So choose something you feel confident to stick with over the long term.

Risk of an illtimed move - doesn't change the long term arguments about a higher equity % a long way out from retirement. 

You need to choose a level you are happy with - be it 40 / 60 / 80 / 100 - and will stick with - until at retirement and access planning stage.

This fund being tepid over these particular 2-3 years because of the bonds - is not - the reason - to change it.  The appropriate long term allocation for your risk tolerance and age now - is.

MeteredOut

bamgbost said:

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....

It may be your default L&G fund, but not the same for everyone. Here's the default fund for my employer scheme with L&G.

Hoenir

gm0 said:

Someone riding into town 1900-1930 retiring into the crash - would perhaps have not been quite as sanguine.

Gets overlooked that the US was still regrded as an emerging market back then. Europe was still overcoming the trauma of WW1. Likewise Japan was still a relatively unknown quantity only recently having exited self imposed exile. Charts unfortunately fail to paint the whole story. 

Bostonerimus1

Hoenir said:

gm0 said:

Someone riding into town 1900-1930 retiring into the crash - would perhaps have not been quite as sanguine.

Gets overlooked that the US was still regrded as an emerging market back then. Europe was still overcoming the trauma of WW1. Likewise Japan was still a relatively unknown quantity only recently having exited self imposed exile. Charts unfortunately fail to paint the whole story. 

Back in the 1930s no one was retiring with a DC pension and the US did not pass Federal Social Security laws until 1935. There was a reasonable safety net in New York, California and Massachusetts who all had state run benefits schemes, but the retirement landscape in the US in the 1930s depended on where you lived and who you worked for. Most people just tried to save something for hard times and expected to keep working, but that became difficult in the Great Depression.