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  • FIRST POST
    • fiisch
    • By fiisch 5th Mar 18, 11:22 PM
    • 285Posts
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    fiisch
    Pension Value Falling
    • #1
    • 5th Mar 18, 11:22 PM
    Pension Value Falling 5th Mar 18 at 11:22 PM
    I am 31 and up until now I've paid little attention to my pension pot. About six months ago, I had a paltry 6k spread across various schemes (I've switched job a lot).

    My latest employer has a much better scheme (10% non-contributory + 5% matched), so I'm currently making 20% contribution. In the last six months, including transfers, I've paid in just shy of 14k, but today's value is only showing as 13.2k.

    I am invested 100% in Blackrock's DC Strategic Accumulation fund - on the riskier end of the scale, but at my time of my life I understand this is acceptable. I know it's early days, but should I be concerned about the drop in value (I know the markets have been undergoing a correction lately) or stick with it? Have I backed a dud? Is 100% all in one fund wise considering the size of my savings thus far?

    Am I on a fair trajectory with my pension savings? My wife currently works part-time (10 hours per week), and doesn't currently have a pension. As I am a higher rate tax payer, looking to further up my AVCs in the forthcoming tax year. We will look to address her pension situation once she can further increase her hours pending childcare commitments.
    Save 6k in 2018: 1651.19 / 6000
Page 1
    • AnotherJoe
    • By AnotherJoe 5th Mar 18, 11:37 PM
    • 9,608 Posts
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    AnotherJoe
    • #2
    • 5th Mar 18, 11:37 PM
    • #2
    • 5th Mar 18, 11:37 PM
    The thing to understand, though it is counter intuitive at first, is that falls are good for you at the moment. As the price falls you are buying more units. You really only want it to rise towards the end of your time.

    However, looking at this fund i see its objective is "Invests mainly in UK equities (around 50%) and overseas equities (around 50%)"

    I think 50% UK equities is far too high for a long term investment. ( i dont like the look of its top ten UK holdings either but thats another conversation)

    Also you say "Is 100% all in one fund wise considering the size of my savings thus far?" but its actually an "umbrella" holding 5 or 6 funds within it - UK, USA, Pacific, Europe etc, and it has what i would say are idiosyncratic fund allocations, for example its very low on US. Some might like that but to only have 16% of the worlds largest economy whilst 50% is "UK" (you might argue if Shell is UK but whatever) seems way out of kilter to me.

    So, i would not worry about the fall but I'd be looking to move to a more general fund that had a more wide spread global approach.

    Everyones opinions different here though, there is no right answer except with hindsight.
    Last edited by AnotherJoe; 06-03-2018 at 8:51 AM.
    • BobQ
    • By BobQ 5th Mar 18, 11:48 PM
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    BobQ
    • #3
    • 5th Mar 18, 11:48 PM
    • #3
    • 5th Mar 18, 11:48 PM
    Many sectors of the market have declined in value in the past 6 months so is the reduced value very surprising?

    Pensions and Shares are a long term investment and you need to accept that judging it over 6 months is not reasonable.

    Black Rock DC Strategic is not "high risk", why did you select it anyway.
    Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.
    • Brynsam
    • By Brynsam 6th Mar 18, 12:09 AM
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    Brynsam
    • #4
    • 6th Mar 18, 12:09 AM
    • #4
    • 6th Mar 18, 12:09 AM
    You acknowledge this fund is at the riskier end of the scale, but after only 6 months you are uncomfortable because it has dropped in value. That's the nature of taking risks - and at your age, you need to weigh up the risk of capital loss (which in reality is likely to be a fluctuation in value rather than a long term diminution) and the risk of investing in a 'safe' fund where the returns are unlikely to keep pace with inflation, never mind do anything more exciting!

    There are plenty of barrack room crystal ball gazers and plenty of historic information (and disinformation). At 31, and with a very modest fund size, chopping and changing makes little sense unless your risk tolerance is much lower than you first believed - that's not something anyone else can tell you.
    • dunstonh
    • By dunstonh 6th Mar 18, 2:10 AM
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    dunstonh
    • #5
    • 6th Mar 18, 2:10 AM
    • #5
    • 6th Mar 18, 2:10 AM
    on the riskier end of the scale,
    So, from that, we take it that you understand that risk means that the ups and the downs will be much greater.

    I know it's early days, but should I be concerned about the drop in value (I know the markets have been undergoing a correction lately) or stick with it?
    An economic cycle is around 10 years. In the last 2 months we have had a minor 10% drop. Your fund is capable of a 40% drop.

    Why would you be concerned about a 10% drop when you know the fund go down 40%?

    Am I on a fair trajectory with my pension savings?
    if its your only pension, you are behind where you should ideally be.

    As mentioned higher up, you want and need the investments to be volatile to make the most money. If investments only ever went up and never down you would get back less.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • atush
    • By atush 6th Mar 18, 11:57 AM
    • 16,825 Posts
    • 10,500 Thanks
    atush
    • #6
    • 6th Mar 18, 11:57 AM
    • #6
    • 6th Mar 18, 11:57 AM
    I am invested 100% in Blackrock's DC Strategic Accumulation fund - on the riskier end of the scale, but at my time of my life I understand this is acceptable. I know it's early days, but should I be concerned about the drop in value
    This makes no sense. If you understand risk, and this is as you say risky, you should not be worried it lost ground recently. You should have expected it. And known that you are buying more units for your money each month.

    This just seems to mean you are investing above your risk profile.
    • fiisch
    • By fiisch 7th Mar 18, 11:12 PM
    • 285 Posts
    • 162 Thanks
    fiisch
    • #7
    • 7th Mar 18, 11:12 PM
    • #7
    • 7th Mar 18, 11:12 PM
    Thanks for the replies all - I'm fairly new to monitoring pension fund so was surprised to see it fall over the last three months, but then I've probably not picked the best time to start watching, and I do appreciate it is a very short time period.

    I understood the DC Accumulation fund to be above average risk and with a decent spread of global equities (I hadn't realised the UK bias) - would anyone care to venture a preferable fund for accumulation at this stage?

    Will be setting up a S&S ISA next month and opting for VLS80, so should be a good test of my risk tolerance!
    Save 6k in 2018: 1651.19 / 6000
    • dunstonh
    • By dunstonh 7th Mar 18, 11:28 PM
    • 93,048 Posts
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    dunstonh
    • #8
    • 7th Mar 18, 11:28 PM
    • #8
    • 7th Mar 18, 11:28 PM
    I'm fairly new to monitoring pension fund so was surprised to see it fall over the last three months, but then I've probably not picked the best time to start watching, and I do appreciate it is a very short time period.
    The value of investments goes up and down on a daily basis. The risk you are taking means your value could fall 50% in a matter of days. You are right near the top of the risk scale.

    The recent drops were around 10%. So, tiny in comparison to what you are going to see.

    Are you sure you have selected the right risk profile? If you logged in and saw the value had halved (which is going to happen sooner or later), what would you do?

    Will be setting up a S&S ISA next month and opting for VLS80, so should be a good test of my risk tolerance!
    VLS80 is lower risk than the pension fund you have selected but above the risk profile of the typical UK consumer.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • fiisch
    • By fiisch 8th Mar 18, 10:07 PM
    • 285 Posts
    • 162 Thanks
    fiisch
    • #9
    • 8th Mar 18, 10:07 PM
    • #9
    • 8th Mar 18, 10:07 PM

    Are you sure you have selected the right risk profile? If you logged in and saw the value had halved (which is going to happen sooner or later), what would you do?
    Originally posted by dunstonh
    Right now, nothing, as I still have plenty of time to boost the pot. Say in fifteen, twenty years, then I'd be panicking...!!
    Save 6k in 2018: 1651.19 / 6000
    • ricky_v
    • By ricky_v 8th Mar 18, 10:32 PM
    • 305 Posts
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    ricky_v
    Say in fifteen, twenty years, then I'd be panicking
    Chances are your pension scheme will automatically start to de-risk your pot into bonds/cash when you get closer to your retirement age, so your pot should be less exposed to mad swings in the equities market in 20 years time. By the time you get to your selected retirement age, there should be very little/none of your pot in equities.

    My latest employer has a much better scheme (10% non-contributory + 5% matched)
    And I thought my DC scheme (10% non-contributory, 3% matched) is as best as it gets in terms of DC schemes. You have a very generous scheme
    • badmemory
    • By badmemory 9th Mar 18, 12:48 AM
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    • 2,318 Thanks
    badmemory
    The only time to panic about the value falling is when you are just about to take it & know that the immediate future is just going to get worse. Welcome to my world!
    • AnotherJoe
    • By AnotherJoe 9th Mar 18, 8:47 AM
    • 9,608 Posts
    • 10,687 Thanks
    AnotherJoe
    Chances are your pension scheme will automatically start to de-risk your pot into bonds/cash when you get closer to your retirement age, so your pot should be less exposed to mad swings in the equities market in 20 years time. By the time you get to your selected retirement age, there should be very little/none of your pot in equities.
    Originally posted by ricky_v
    That's now an out of date practice from the time when people took out an annuity immediately upon retirement, retired age 65 and lived for about 10 or 15 years . Nowadays when you might retire at 60 or so, live another 25-30 years, not take an annuity until age 75 plus, and thus be invested for 15 to 20 years after retirement, getting wholly out of annuities would be not advised.

    You might well go for less risky equities and a larger proportion in bonds or other non equity investments but getting wholly out would be not advised by most.

    As a sign of how rapidly this change in thinking occurred, in 2008 my company started a new pension scheme which had this lifestyling approach for the last 5 years before retirement and it was the default scheme you were enrolled in. By 2016 they were starting reviews of people entering this 5 year phase to in effect say "are you sure this is the best idea" and by 2017 any new entrants to the scheme were no longer enrolled in that scheme by default.
    • Prism
    • By Prism 9th Mar 18, 9:17 AM
    • 369 Posts
    • 287 Thanks
    Prism
    That's now an out of date practice from the time when people took out an annuity immediately upon retirement, retired age 65 and lived for about 10 or 15 years . Nowadays when you might retire at 60 or so, live another 25-30 years, not take an annuity until age 75 plus, and thus be invested for 15 to 20 years after retirement, getting wholly out of annuities would be not advised.
    Originally posted by AnotherJoe
    Agreed, I can't imagine a situation when I am less than around 50% equities for the rest of my life.
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