My SIPP seems to be underperforming: what options are there?

Robin50

I'm now 74, and on the advice of my small business accountant, in 2010 I moved my pension pot into a SIPP (managed by a reputable company, so I'm told)  and started drawing down in 2015. The latest valuation looks disappointing and even though my annual drawdown is very modest, since 2017 the value of my pot has decreased annually by more than I have drawn out each year.  A rough calculation shows that if I had just put it all in a current account with 0% interest I would still be "better off" than I am now.  If there had even been a modest interest rate, say 2%, I would be much better off.  I suppose this situation is the result of low returns on the investments made by the company, and the fees they charge, which seem generous to me.

Based on the trend since 2017 and their predictions, I would even now still be better off taking the entire pot in cash, just putting it under the mattress and drawing out the same sums each year.  Yes, I know: inflation, etc., but that applies to the existing situation as well.

So now I don't know what to do.    As you can guess, I might be 74 years old but I'm still a wet-behind-the-ears novice when it comes to managing money.  Do I have the right at this stage to transfer the pot elsewhere?  I don't even know where to start looking for honest advice.

Mark_d

Based on your age and the current economic climate I would be investing in funds primarily of corporate bonds and then gilts.  But there's never a guarantee that your investment will perform well.  It's a case of learning from the past

Linton

Robin50 said:

I'm now 74, and on the advice of my small business accountant, in 2010 I moved my pension pot into a SIPP (managed by a reputable company, so I'm told)  and started drawing down in 2015. The latest valuation looks disappointing and even though my annual drawdown is very modest, since 2017 the value of my pot has decreased annually by more than I have drawn out each year.  A rough calculation shows that if I had just put it all in a current account with 0% interest I would still be "better off" than I am now.  If there had even been a modest interest rate, say 2%, I would be much better off.  I suppose this situation is the result of low returns on the investments made by the company, and the fees they charge, which seem generous to me.

Based on the trend since 2017 and their predictions, I would even now still be better off taking the entire pot in cash, just putting it under the mattress and drawing out the same sums each year.  Yes, I know: inflation, etc., but that applies to the existing situation as well.

So now I don't know what to do.    As you can guess, I might be 74 years old but I'm still a wet-behind-the-ears novice when it comes to managing money.  Do I have the right at this stage to transfer the pot elsewhere?  I don't even know where to start looking for honest advice.

Transferring the pot elsewhere wont have made any difference.  It is the choice of funds (or other investments) within the SIPP that decides the returns, not the SIPP manager.

If you can tell us what the fund(s) are we can give more details.  However it is likely that you or your accountant chose a very cautious fund because of your age.  Many such funds were badly hit in 2022 when interest rates rose very quickly.

Business accountants are perhaps not the best people to get advice from for personal investing.  If your pension pot is reasonably large, say >£100K, you may be better off consulting an Independent Financial Advisor.

dunstonh

My SIPP seems to be underperforming: what options are there?

SIPPs do not perform.  The investments you hold within the SIPP are where the performance comes form.  And SIPPs have circa 30,000 investment options and near infinite combinations.

The latest valuation looks disappointing and even though my annual drawdown is very modest, since 2017 the value of my pot has decreased annually by more than I have drawn out each year.  

Quite possible.

If you are heavy in the stockmarket you would expect to see gains over that period (unless you draw was unreasonable).  If you are heavy in fixed interest securities, then they are flat over that period and withdrawals would have seen a decline in value.

Do I have the right at this stage to transfer the pot elsewhere?

As SIPPs are whole of market, then transferring the SIPP to another SIPP doesn't change anything.   Its what you hold in the SIPP.  Which you haven't told us.  Knowing what you invest in would help a lot.

Robin50

Thank you all for your quick replies.  At least I think I see a bit more clearly what I need to be looking at, and some of the questions I need to ask.  I'll be honest, knowing nothing about investing I've left it all in the hands of the manager company; the basic ideas were to have diversified investments and a "cautious" profile.  As far as I remember about 20% is in commercial property and the rest is in various "mixed" investments, but I don't know in details what that means.

The total valuation is around £200,000 and I draw £8000 pa.  As far as I can see the charges are about 4.5%.  Maybe with Covid, and Ukraine (and interest rates, as you say) it's not surprising that cautious investments haven't done that well over the last 5 years or so?

(BTW my accountant didn't really give me financial advice (he was very clear about that).  When I turned 60 I had to make decisions about an old pension I benefitted from in earlier days, so I asked a few questions and he told me which company he was using for his pension.  We'd known each other for quite a few years and I trusted him, so I just followed up.)

Albermarle

As far as I can see the charges are about 4.5%. 

That would put you at the astronomical end ! I am thinking that figure is not correct, as it is so high.
Can you break it down?

dunstonh

I'll be honest, knowing nothing about investing I've left it all in the hands of the manager company; the basic ideas were to have diversified investments and a "cautious" profile. 

Do you actually have an adviser or have they just left you in what they set up at the start?

Cautious would generally mean heavy in defensive assets and they have had a torrid time.  

As far as I remember about 20% is in commercial property and the rest is in various "mixed" investments, but I don't know in details what that means.

Commercial property funds were very popular years ago and were steady eddies for returns.  However, traders started putting money in and destroyed most of the property funds with their frequent deposits and removals and most people don't use property funds like that any more.

The total valuation is around £200,000 and I draw £8000 pa.  As far as I can see the charges are about 4.5%.

For an advised solution with ongoing servicing, you are looking at around 0.80% at the lower end upto 2.00% at the upper end.    4.5% is not consistent with expectations.  So, I suspect that is an error.

QrizB

Robin50 said:

I'm now 74, and on the advice of my small business accountant, in 2010 I moved my pension pot into a SIPP (managed by a reputable company, so I'm told) 

Can you tell us the name of this reputable company? It might cast some light on things.

Robin50

Thanks, both.  To check the actual figures for the fees I'll need to dig out all the valuations and go through them. That will take me a bit of time; there are many different headings. I need to do it, though, obviously.

Very interesting comments, dunstonh: thanks. 

Marcon

dunstonh said:

The total valuation is around £200,000 and I draw £8000 pa.  As far as I can see the charges are about 4.5%.

For an advised solution with ongoing servicing, you are looking at around 0.80% at the lower end upto 2.00% at the upper end.    4.5% is not consistent with expectations.  So, I suspect that is an error.

But presumably it'll be higher because OP is no longer resident in the UK - although possibly not that much higher??

Bostonerimus1

OP, you really need to give us some basic information about your pension before we can say anything. So what investment funds are inside it? Who is the "reputable company" that is managing your pension? and explain where you get the 4.5% fees because that's ludicrously high.