Pension statements - inconsistent values

vacheron

IdrisJazz said:

Mark_d said:

Example 1
The 2023 projected pot of 87400 is either wrong, or invested in something with little growth.

2024
The current value is higher than in 2023 - as expected.  The projected pot is roughly based on annual growth of 7% - which is reasonable.  The annuity figure is not unreasonable.

Example 2
The projected annuity is wrong.  Potentially this is linked with the inability to calculated the projected pot.

Thanks everyone for your responses.

Mark's comment on example 1 above has triggered something. 

The Lloyds pension was invested in their highest risk lifestyling option. However, I realised a few years ago that the lifestyling was resulting in no equity funds TWENTY YEARS from retirement. I'm still quite upset about this. 20 years is way too early to be switching out, and I think I've lost a fair bit of value as a result.

A couple of years ago I left the lifestyling option and switched most of my holdings out of their "mixed investment fund" into UK and Global equities. This might explain the assumed growth rate change, though the timings don't work out exactly.

This is an issue which tens, if not hundreds of thousands of people could be sleepwalking into where they are planning on drawdown but their pension scheme could still be set up for lifestyling on the assumption that their desire is to purchase an annuity.

I had my call from Scottish Widows last year telling me that they were implementing this on one of my policies when I hit 50 a few months later when I would have been 15 years from the retirement date of 65 which they had on record. I had to call them up and confirm that I wanted my investments left exactly as they were. 

I think many people will receive a "boring pensions letter" and either not open it, or read the part where it says "we are doing this in your best interests", and just go back to sleep!  

IdrisJazz

Albermarle said:

The Lloyds pension was invested in their highest risk lifestyling option. However, I realised a few years ago that the lifestyling was resulting in no equity funds TWENTY YEARS from retirement. I'm still quite upset about this. 20 years is way too early to be switching out, and I think I've lost a fair bit of value as a result.

It does not make sense that a highest risk lifestyling option should switch totally out of equites so long before retirement. Normally 10 years out would be typical and even then would be a gradual drop.

No it doesn't.

I've looked through the transaction history this morning. An amount of £30000 was transferred by a "phase switch" in 2018 from GLobal Equity to Mixed Investment fund, and from then on monthly amounts until the whole lot had been switched out by the end of 2021.

This was nothing I requested, and does not align with my understanding of lifestyling, which in their own words only starts to make swtiches 10 years before retirement.

I'm going to make a complaint, because I can't understand what they have been doing with my investments

Sarahspangles

IdrisJazz said:

This was nothing I requested, and does not align with my understanding of lifestyling, which in their own words only starts to make swtiches 10 years before retirement.

Out of interest when does the ten years’ countdown start? Is it SPA-10 or can it be earlier if you state an earlier desired retirement age?

IdrisJazz

Sarahspangles said:

IdrisJazz said:

This was nothing I requested, and does not align with my understanding of lifestyling, which in their own words only starts to make swtiches 10 years before retirement.

Out of interest when does the ten years’ countdown start? Is it SPA-10 or can it be earlier if you state an earlier desired retirement age?

The 10 years would start from 2031 when I am 55 (SRA = 65). In 2018 I was 42 which doesn't align to anything.

vacheron

Sarahspangles said:

IdrisJazz said:

This was nothing I requested, and does not align with my understanding of lifestyling, which in their own words only starts to make swtiches 10 years before retirement.

Out of interest when does the ten years’ countdown start? Is it SPA-10 or can it be earlier if you state an earlier desired retirement age?

It is the date you told them you would like to retire when you set up the policy. Some of my providers schemes begin 10 years beforehand and others 15 years beforehand, some lifestyle in 2 or 3 steps, but some use 4 or 5. 

This means that if someone in their early 20's had optimisitcally said "oh, i'd like to retire at 55" back when they first set up the policy 20 odd years ago , their provider could automatically start lifestyling them out of high growth investments now when they are just 40 years old!

(This is assuming they don't carefully read any of the pension correspondence they are sent, but how many regular people actually will?)

Sarahspangles

vacheron said:

Sarahspangles said:

IdrisJazz said:

This was nothing I requested, and does not align with my understanding of lifestyling, which in their own words only starts to make swtiches 10 years before retirement.

Out of interest when does the ten years’ countdown start? Is it SPA-10 or can it be earlier if you state an earlier desired retirement age?

It is the date you told them you would like to retire when you set up the policy. Some of my providers schemes begin 10 years beforehand and others 15 years beforehand, some lifestyle in 2 or 3 steps, but some use 4 or 5. 

This means that if someone in their early 20's had optimisitcally said "oh, i'd like to retire at 55" back when they first set up the policy 20 odd years ago , their provider could automatically start lifestyling them out of high growth investments now when they are just 40 years old!

(This is assuming they don't carefully read any of the pension correspondence they are sent, but how many regular people actually will?)

I stated 60 when I was set up in a workplace scheme, they did write to me to let me know the implications at 50

Albermarle

IdrisJazz said:

Albermarle said:

The Lloyds pension was invested in their highest risk lifestyling option. However, I realised a few years ago that the lifestyling was resulting in no equity funds TWENTY YEARS from retirement. I'm still quite upset about this. 20 years is way too early to be switching out, and I think I've lost a fair bit of value as a result.

It does not make sense that a highest risk lifestyling option should switch totally out of equites so long before retirement. Normally 10 years out would be typical and even then would be a gradual drop.

No it doesn't.

I've looked through the transaction history this morning. An amount of £30000 was transferred by a "phase switch" in 2018 from GLobal Equity to Mixed Investment fund, and from then on monthly amounts until the whole lot had been switched out by the end of 2021.

This was nothing I requested, and does not align with my understanding of lifestyling, which in their own words only starts to make swtiches 10 years before retirement.

I'm going to make a complaint, because I can't understand what they have been doing with my investments

The Mixed Investment fund will most likely contain a decent % of equities, so you have not been 'moved out of equities' 100%

The typical  lifestyling fund will never have you in 100% equities, as the volatility causes issues for many clients. Typically it maybe 70% until you are 10 years away from the retirement age they have in their system and then reduces.

So maybe the Lloyds one has you in 100% equity when young and then 20 years out from retirement moves you into a multi asset fund with maybe 70% equities. This would kind of make some sense as it would probably more suit the risk profile of the average client.

It sounds like you personally would be better out of the Lifestyling option altogether, if possible.

IdrisJazz

I have raised a query/complaint with the trustees, and they have already responded. 

My funds were moved as a bulk change to the funds they were offering across the scheme. I was notified, but like most punters, was not really aware of what was changing.

I was moved into a new lifestyling approach, which moves funds 30 years from retirement out of Global Equity until everything is in Mixed Investment Fund by the time you are 20 years form retirement.

I have looked at historical unit prices, and in the time it took me to notice, the mixed investment fund grew by 23% and the global equity fund grew by 46%. That has cost me £6500 in growth just for the first £30k that they moved. Presumably, they moved a big chunk because at the time of the change I was already less than 30 years from retirement.

I remain peeved. I think 30 years from retirement is way too early to start reducing the risk - some people don't even start a pension until they are 25, and want to retire in their 50s... And this is their approach with a "flexible income focus"!!!

Over the last 3 years, the MIF has "grown" by -0.1% compared to +22% for global equity. There is clearly quite a difference in the investment strategy.

I suppose that as I was notified I don't really have a valid complaint, but I don't feel this approach aligns with the selection I made up front, which (if I remember correctly) would have left everything unchanged until I reached 55.

I'm going to reflect for a while, and probably discuss with my dad (a former IFA), but I probably have to suck this up and move on.

dunstonh

 I was notified, but like most punters, was not really aware of what was changing.

Ignoring what you are being told and then moaning about it later is rarely a good way to do things.

I remain peeved. I think 30 years from retirement is way too early to start reducing the risk - some people don't even start a pension until they are 25, and want to retire in their 50s... And this is their approach with a "flexible income focus"!!!

If only they had notified you....

Over the last 3 years, the MIF has "grown" by -0.1% compared to +22% for global equity. There is clearly quite a difference in the investment strategy.

Different research gives different outcomes but they are all in the same ballpark.   Lifestyling providers lower returns in around three quarters of cases.    It isn't about maximising return but minimising loss.

Albermarle

I was moved into a new lifestyling approach, which moves funds 30 years from retirement out of Global Equity until everything is in Mixed Investment Fund by the time you are 20 years form retirement.

I think what is unusual, is that a lifestyling approach was ever invested in 100% global equity, even 30 years out from retirement. Most workplace pension clients are not aware of the finer points of investing, so imagine the complaints to the trustees if their 100% equity pot dropped 40%, which is probably why they have backed off from this rather high risk approach.

Over the last 3 years, the MIF has "grown" by -0.1% compared to +22% for global equity. There is clearly quite a difference in the investment strategy.

In a different 3 year period the results could have been reversed, partly anyway.