Pension Provider investing 30% of my Pension in a Fund performing worse than -20% for 3 1/2 years!!!

Mr_Angry_from_Odiham

I don’t wish to name the TOP-10 UK Pension Provider just yet, (I will do if I do not have a satisfactory outcome to my complaint).  I will just identify them for now as “[Pension-Co]” below.   If Martin Lewis wants the actual name of this provider, I will provide it to him.
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Do you have a Workplace Pension with [Pension-Co]?
Have you selected a Risk-v-Rewards option (‘Adventurous’, ‘Balanced’, ‘Cautious’) together with a ‘For Annuity’ Outcome option?    Then you should read this.

Many Pension plan holders are probably, like me, in thinking that a Pension Management company such as [Pension-Co] can be trusted to make wise investment decisions to ensure my Pension Pot grows steadily and avoids stagnation or worse, diminishing, in the final years before retirement.  

I was horrified to discover recently that almost 30% of my Pension Pot is being invested, in a FUND ironically named the “PENSION PROTECTOR....” FUND.   A complete oxymoron given this FUND has  :-

1. Performed negatively since December 2021/January 2022.
2. Performed worse than -20% (MINUS 20%) since May 2022.
3. Performed worse than -30% a lot of the time since May 2022.
4. Decreased by 30.1% between 30-Apr-2020 and 30-Apr-2025.

To save Pension holders having to familiarize and monitor the performance of individual FUNDs, [Pension-Co] also uses a level of abstraction - let's call this RISK-V-REWARDS choices based on risk-reward categories:  Adventurous    Balanced    Cautious.   Combined with the 3 RETIREMENT OUTCOMES for your pension savings:   ‘Targeting Annuity’,  ‘Targeting Encashment’ (lumpsum),  ‘Targeting Flexible Access’.  The unspoken assumption being that Pension Plan owners like me just specify Risk-v-Rewards choice they are comfortable with, AND what they intend to do with their final Pension Pot (Outcome choice), and then [Pension-Co] can be trusted to select the most appropriate/’best’ FUNDs to deliver against those expectations.  Well it seems that trust is misplaced.

I had selected:      Balanced Risk-v-Rewards  with 'Targeting Annuity’ outcome assuming [Pension-Co] would be selecting FUNDs with a good balance of RISK v RETURNs to deliver good outcomes for a transition to an Annuity at retirement age.  I have just less than 3 years to Retirement.

My confidence in using these Risk-v-Rewards and Outcome choices and expecting [Pension-Co] to manage my pension according to my reasonable expectations, was badly misplaced (so it seems).   I am sure that other Pension Plan holders will feel the same when they read on and look into this.

For a 'Targeting Annuity’ outcome, all 3 Risk-v-Rewards choices use the same split of 3 Funds for the final 4 years leading up to Retirement !!!    i.e.  for the last 4 years before retirement, it doesn’t matter which Risk-v-Rewards you have chosen as the investments are the same (same funds, same proportion of the Pension Pot)!!!

What's worse, for 'Targeting Annuity’ outcome,  the proportion of your Pension Pot that is actually invested in this poorly performing, ironically named “PENSION PROTECTOR....” fund increases as you get closer to retirement:    15% in Year-4,  30% in Year-3,  45% in Year-2,  60% in Year-1,  and 75% in the final year before Retirement.   Assuming the current performance of the Funds invested in, then Pension Pots will almost certainly be reducing – especially in the final year(s).

Remember this is a FUND that has not performed positively since December 2021/ January 2022, and has been performing at -20% to -40% since May 2022 !!!!    Who would invest in such a FUND as this, and using such a high proportion of your Pension Pot?

It may be time for you to check your assumptions about the Risk-v-Rewards choice, Output option and your reliance on [Pension-Co]  to take the most appropriate decisions on how to invest your Pension Pot – and, to look closely at what FUNDs [Pension-Co] are actually investing your Pension Pot in,  and the performance of those FUNDs over the past 5 years.

I raised a complaint with [Pension-Co] two months ago.  After 6 weeks of getting no reply (other than they were investigating), I called the Complaints Manager.  It was abundantly clear to me that she had not even looked into my complaint at that point and I had to explain it from scratch.  She promised to respond by the end of that week.  She responded exactly 1 minute before clocking off on Friday afternoon (so that when I called her immediately, I got no response) - and she was then conveniently on leave for the following Monday and Tuesday.

I found her response to be generic and bland  "Fund performance should be viewed over a five-year period as the ups and downs in the market are more likely to be absorbed overall in a period of greater than five years."    Bearing in mind that the FUND in question has not performed positively for 3 ½ years, and has been performing at -20% to -40% since May 2022    AND  bearing in mind I have less than 3 years to Retirement age !

During April and May I emailed :  the Customer Service Complaint Manager,  the Head of Investment Ops., Head of Asset Allocation and Research,  Head of Product Governance,  Investment Strategy and execution, Head of Digital Marketing.

Only the Complaints Mgr, has responded to date.  I also found her most recent response to be bland, defensive and frankly a bit of a joke "Please be assured that our Fund Manager continues to monitor all funds closely. Should any issues arise with a fund you are invested in, you will be contacted directly”.   
And what appears to me to be an attempt to cloud the issue: "As your complaint relates to fund performance—an aspect that is not within [Pension-Co]’s control—we are unable to uphold your complaint"  (I have responded, pointing out that my complaint has always been about [Pension-Co]’s selection of which FUNDs they invest my Pension Pot in, and that this IS very much under your control and the main reason why I am using their services).

On 1st June I also reached out to the CEO of [Pension-Co], their Chief Investment Officer, Head of Investment Solutions and others.   I got a call from their Executive Complaints Manager within days saying my complaint has been re-opened.  I hope to have a call soon with their Workplace Savings Director.   To be honest, I am not confident that this will be any more than another attempt by them to defend their funding decisions and not own up to any mistakes. 

 I am left utterly shocked at:-

·        [Pension-Co]'s investment decisions related to “for Annuity” outcomes, in the final 4 years before Retirement, (specifically including this under-performing PENSION PROTECTOR FUND).

·        the fact that [Pension-Co] uses a layer of abstraction (Risk-v-Rewards & Outcomes) meant to help us Pension Plan holders - but which, in reality, masks the badly performing FUNDs that are employed for these options in these essential years just before Retirement, which I believe are leading to a huge gap between assumptions/ expectations, and actual performance,

·        and at the very poor experience I have had when dealing with [Pension-Co]’s Customer Support and Complaints Management operations -  two and a half months of bland responses and fob-offs.

Please warn your viewers/ other [Pension-Co] customers about this.  Many Pension Holders will lose-out big time, unless they do as I have done – which is, to opt-out of the Risk-v-Rewards and Outcomes choices and select FUNDs themselves.  FUNDs that are much more likely to lower investment risk and build up your Pension Pot.

I should NOT have to do this and I am not a seasoned investor so there is some inherent risk.  But I believe I can do a better job of selecting more appropriate FUNDs to invest in than [Pension-Co] has demonstrated.  

Which begs the question – exactly what VALUE-ADD is [Pension-Co] bringing to the Pension management engagement, if I have to resort to exploring and selecting more suitable and safer investment FUNDs myself?   Surely, the whole point of using a Pension Plan rather than other investment options is because the Pension provider can be trusted to invest in a portfolio of Funds which will avoid losses and optimise Pension Pot growth.

Come on [Pension-Co] – please review your use of this FUND, and the FUNDs linked to Risk-v-Rewards / Outcome choices in general -  especially for Pension Holders hoping to have a reasonable Annuity in a few years’ time.  There are enough pitfalls and uncertainty with the markets and global economy, without renowned Pension Providers like you also letting us down or falling short when it comes to acting in your members’ interests.

booneruk

This is too much to read if I'm honest.

If the nub of this is that a fund targeting an annuity purchase has been chosen then yes, it would have underperformed a lot of asset classes in recent years due to the interest rate shock. However - it will still generally purchase the same level of annuity as before.

I presume you were given the opportunity to research and select your own funds?

Are you actually worse off?

EthicsGradient

I also suspect it is the interest rate hikes that have caused this. Here, for example, is the performance over 5 years of 4 funds in the 'Sterling Long Bond' designed for targeting an annuity:
Chart Tool | Trustnet
One is called a "pension protector". It would be conventional wisdom to use these as the date for the annuity approaches. The good news is that the increase in interest rates means a certain amount in cash will buy a far better yearly annuity than it would have 5 years ago (see eg Annuity Rates Chart | latest changes to pension income _. These are 2 halves of the same coin, and I'd suggest comparing the yearly (or monthly) annuity you will get to what was expected 5 years ago before taking this further.

dunstonh

Pension Provider investing 30% of my Pension in a Fund performing worse than -20% for 3 1/2 years!!!

Not quite

You are in charge of the funds in your pension. Not the provider. 

You have selected a fund that reduces in risk as you get closer to retirement with the intention of using 75% to buy an annuity.    The funds used for that have done just that.     The loss in value is irrelevant as the annuity rate does the opposite.  Think of it  as similar to 10 x 3 vs 3 x 10.

Please warn your viewers/ other [Pension-Co] customers about this.  Many Pension Holders will lose-out big time, unless they do as I have done – which is, to opt-out of the Risk-v-Rewards and Outcomes choices and select FUNDs themselves.  FUNDs that are much more likely to lower investment risk and build up your Pension Pot.

This is a website.  It doesn't have viewers.  It has readers.

Nobody has lost out.  You haven't lost out.

But I believe I can do a better job of selecting more appropriate FUNDs to invest in than [Pension-Co] has demonstrated.  

The fund selected acts a hedge to annuity rates and has done exactly that.
What would you use as a hedge to annuity rates?

Which begs the question – exactly what VALUE-ADD is [Pension-Co] bringing to the Pension management engagement, if I have to resort to exploring and selecting more suitable and safer investment FUNDs myself? 
 

 You appear to have misunderstood.
The pension provider takes instructions from you or your financial adviser. 

Surely, the whole point of using a Pension Plan rather than other investment options is because the Pension provider can be trusted to invest in a portfolio of Funds which will avoid losses and optimise Pension Pot growth.

No, that is not the point.  You can mostly have the same investments in an ISA or pension or directly or other tax wrapper.   

I'm afraid your issue is one of lack of understanding and there is no wrong doing.

You just happened to have invested through the worst period for bonds in over 100 years.  However, you have been protected from that because annuity rates have gone up.    You will almost certainly find you are financially better off than you were three and half years ago.

QrizB

I'm just going to agree with everyone else.

You've chosen a scheme with lifestyling, where your investment mix changes automatically to reduce risk as you approach retirement age.

In your case, you've chosen a scheme that's intended to let you buy an annuity. To reduce risk, it's moved your investments into a fund that holds UK Government bonds (gilts).  Annuity prices rise when gilt prices fall, and vice-versa. This past few years (starting with the Truss government) have seen Government borrowing costs rise and gilt prices have fallen, hence the loss of value in your investment.

However, annuity prices have moved in the opposite direction and your investments will still buy an annuity they provides a similar monthly income as before.

Thosnis an intentional feature of the pension scheme you have chosen.

masonic

As others have pointed out, the purpose of a "pension protector" type product is to lock in a level of annuity. That means that if annuity rates fall, the product will rise to compensate, or if annuity rates rise (as they have done recently), the product will fall. It takes away some of the risk when approaching retirement, but also the opportunity to get a better deal.

It is not the pension company's fault that you opted for this fund when annuity rates were at historic lows and they subsequently improved, with you missing out on the benefit of that. It is not the purpose of a pension plan to tactically avoid losses - this is near impossible and unwise to attempt. The purpose is to select suitable investments for given objectives. The pension protector funds suit the objective where the investor has a large enough pot to provide the annuity income they desire and wants to lock this in to some degree. It has achieved this.

Also, Martin Lewis doesn't read the forum, and doesn't opine on investments generally.

Albermarle

Plus just to point out that if you had chosen a similar type fund with another pension provider, you would have got a similar result.

Marcon

Mr_Angry_from_Odiham said:

Come on [Pension-Co] – please review your use of this FUND, and the FUNDs linked to Risk-v-Rewards / Outcome choices in general -  especially for Pension Holders hoping to have a reasonable Annuity in a few years’ time.  There are enough pitfalls and uncertainty with the markets and global economy, without renowned Pension Providers like you also letting us down or falling short when it comes to acting in your members’ interests.

Hopefully by now you will have read the replies above, realised you have completely misunderstood what you've chosen to invest in, and will leave Pension-Co to get on with their job: investing your pension in the funds you have selected.

leosayer

Mr_Angry_from_Odiham said:

I should NOT have to do this and I am not a seasoned investor so there is some inherent risk.  But I believe I can do a better job of selecting more appropriate FUNDs to invest in than [Pension-Co] has demonstrated.  

Which funds would you have invested in?

Have you calculated your loss?

dunstonh

leosayer said:

Mr_Angry_from_Odiham said:

I should NOT have to do this and I am not a seasoned investor so there is some inherent risk.  But I believe I can do a better job of selecting more appropriate FUNDs to invest in than [Pension-Co] has demonstrated.  

Which funds would you have invested in?

Have you calculated your loss?

I suspect the OP hasn't calculated it. If they had, they would realise that they are still up despite the fund value being down and wouldn't have made this thread.

i.e.  Fund value down 20% in 3.5 years but annuity rates double what they were 3.5 years ago.  Net outcome is that they are better off and that the fund has done the job it was intended to do.

Hoenir

Mr_Angry_from_Odiham said:

 Surely, the whole point of using a Pension Plan rather than other investment options is because the Pension provider can be trusted to invest in a portfolio of Funds which will avoid losses and optimise Pension Pot growth.

What differentiates a pension plan from any other "investor" who is taking a calculated risk in attempting to optimise the return on their money ?  If everybody is a winner. Who pays ?