Clerical Medical - Loss in pension value?

SouthCarolina1

How many lost money resulting from a LifeStyling (reinvestment strategy) with Clerical Medical?

This is where the company moved investments from stocks and shares to "safer" bonds and gilts. But the strategy backfired - triggering significant losses.

El_Torro

What do you mean by "lost money"? This strategy usually involves buying an annuity when the person retires. Did it also involve getting a reduced annuity?

Isthisforreal99

And maybe the losses would have been greater had they not moved investments? Did you check that?

Marcon

https://forums.moneysavingexpert.com/discussion/6678705/clerical-medical-loss-in-pension-value

Probably the same sort of percentage who opted for a similar choice of investment strategy with any of the major players offering it. Nothing to stop a customer switching their funds if they don't like the way things are panning out.

dunstonh

How many lost money resulting from a LifeStyling (reinvestment strategy) with Clerical Medical?

LifeStyling is not about making money. It's about protecting you from losses as you get closer towards buying an annuity.

And on the basis of that, nobody has lost money. That is, unless they didn't intend to buy an annuity and were invested in the wrong way for that objective.

Yes, the value would have gone down, but annuity rates have gone up. And they've gone up more than the loss in the value. So in reality, you're better off.

At the end of the day, you need to remember that you are the one responsible for your investment choices. The product provider just follows your instructions.

SouthCarolina1

https://forums.moneysavingexpert.com/discussion/comment/82091577#Comment_82091577

2021-2 ish the fund value dropped, and if an annuity was not wanted the 25% cash deduction was lower. Grrrr!

SouthCarolina1

https://forums.moneysavingexpert.com/discussion/comment/82091624#Comment_82091624

But an annuity was not wanted. The 25% cash was. Grrrrr.

QrizB

But an annuity was not wanted.

If an annuity was not wanted, why did you choose a lifestyle scheme that was targeting an annuity purchase?

dunstonh

2021-2 ish the fund value dropped, and if an annuity was not wanted the 25% cash deduction was lower. Grrrr!

November 2021 through to October 2023 was the worst of the falls. However, they've remained volatile until recently.

In simple terms, traditional LifeStyling starts taking money out of the stock market to put into gilts and fixed interest securities that act as a hedge to annuity rates. Its primary purpose is to make sure that you do not lose 30-40% of your money through a stock market crash just before you retire and buy the annuity.

The period since November 2021 has been the worst period for gilts in over a hundred years. However, it's also seen the most significant rise in annuity rates for the same reason. In really simple terms, if one goes down, the other goes up.

For those who are not buying an annuity, there are different ways and more modern ways to reduce risk as you get closer to the vesting point. However, they typically require you or your financial advisor to make manual fund switches.

Basically, when you bought or set up the product, an annuity would have been the only way to access the pension. So the LifeStyling would have been selected to match that.

After the 2016 changes that made drawdown functionality more widely available, once you or your financial advisor (if you employ one) realised you weren't buying an annuity, you should have made changes out of the LifeStyling fund. As no changes were made, you've been in an investment strategy that didn't meet your revised objectives. That is not a fault of Clerical Medical. You are also not alone either. Some people don't take an interest in their investments, or don't employ a financial advisor if they don't want to do it themselves. Unfortunately, this is the sort of thing that can happen.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82091819#Comment_82091819

So why did you choose to follow a path leading you to the wrong destination? That's not down to CM doing anything wrong.

gm0

In an additional irony. Life styling is not a product selling choice providers made. They were pushed into it by FCA and predecessor regulators. To solve the problem of the community of folk who were buying annuities on a fixed date. (the only option for access at the time) so everyone. For a minority - particular cohorts. This was a horror show. People with retirement flexibility could move the date, others not. And there was an age limit - for forced purchase.

Getting caned by short term stock market movement on commencement lump sum and the value of the pension income. For life. It made sense to pull people back from full speculative risk in the run up to the normal retirement date to stop that car crash blighting retirements. They were mostly worrying about equity crashes at the time - if I recall correctly this was post dotcom and pre 2007 mega crash.

Protect specific cohorts from risks they had no control over whatsoever - and offer it as a default for the don't know don't want to crowd and provide an opt out to "choose your own funds" for those who wanted no automation thank you very much. Providers were strongly encouraged aka forced - to make a decision to offer such a thing. And by default corral people into it. It is a long shot that the government would now ever do a 180 and get the FCA to say "you forced people to do that - and some of them suffered from their choice/default". Stranger things have happened but I am not holding my breath.

People have already done the "this was your responsibility all along" thing to death to signpost to others to pay attention. I won't labour it. It doesn't make it feel any better. I was moving old pensions towards drawdown circa 2021/2022. And had opted out of lifestyling for annuity or more modern versions of it (which do the same thing but less - for drawdown). That left me wondering when to sell my 100% equities. And whether to buy bonds at all - and which ones and when. I still had to make a decision because I hadn't made one earlier. To try and achieve the in retirement now taking income in drawdown setup at the risk level for me.
Without catching a bonds reset falling knife in the first years - the 100 year bond revaluation event post QE discussed above.

Investment "Pathways" is the present day version of the regulator meddling in trying to create default or simple options in a complex problem space - in that case the "what should i invest in in retirement problem".