Pensions - are everyone's losing money or just mine
Discussion
I have decided to do something about my various pension pots that I have scattered about from previous jobs.
None of them are worth very much, but I have noticed that they each tend to make a fairly significant 'investment loss' each year. They are all invested in what the various providers describe as medium risk funds.
Is this happening to everyone else, or are pensions just a bit like other financial products where if you don't update your 'deal' every few years they start penalising you?
None of them are worth very much, but I have noticed that they each tend to make a fairly significant 'investment loss' each year. They are all invested in what the various providers describe as medium risk funds.
Is this happening to everyone else, or are pensions just a bit like other financial products where if you don't update your 'deal' every few years they start penalising you?
Mattt said:
Each year or just after the last year?
You can consolidate but there may be charges involved.
The one that prompted me to make the post lost 5% this year (to May 2016) and about 2% the year before.You can consolidate but there may be charges involved.
If the markets have been THAT bad over those periods then I guess I could live with it. I didn't think they had been, but I'm certainly no expert!
It just seems that the money I have got in current and savings accounts is constantly making more than my pensions, and even that is very low.
JulianPH said:
Hi John, I'll try and help the OP...
John is right, it is investment choice and charges that determine the overall returns from a pension.
This is quite simplistic but, the FTSE was down c. 10% over the one year period to May 2016 so a FTSE Tracker would have fallen by twice as much as your pension (then add charges). As your pension has only fallen by half this amount it would indicate some good diversity that has protected you from half of this fall (after charges, too).
Taking a snap-shot over short periods is often not helpful, these are long term investments (by the way the FTSE has virtually recovered since May so much of your loss should have too).
Consolidating various smaller schemes into one pot is often a good idea as you can see everything in one place. Have a look at something like YouInvest from AJ Bell. You can move all your pensions over for free and then pick a selection of low cost Exchange Traded Funds to build a portfolio you are happy with, or select an fully managed investment option (I would recommend one that uses passive investments to reduce costs) or ask an adviser to make a recommendation for you for a fixed fee.
It is not difficult to do it yourself though, the simplest way is to put 60%-70% in a Vangaurd Global Equity ETF and 30%-40% in a Vangaurd Global Bond ETF and let them run. This is very low cost - so your pension is not losing a lot of money to charges.
A lot depends upon your age now, how long you have to invest and what you want to do with the money at retirement. You have to consider your capacity for risk/reward as well. Give us some more info on your circumstances and plenty of people here will be happy to give you their opinions.
Cheers
Edited for typo and to highlight what Ozzie said about checking for any benefits your current pensions may have that you would lose if you consolidated them.
Thanks for those comments. In terms of the other information, I am 40 years old, can't imagine I'll retire before 65 and I'd like to stay flexible as to what to do with the money at retirement.John is right, it is investment choice and charges that determine the overall returns from a pension.
This is quite simplistic but, the FTSE was down c. 10% over the one year period to May 2016 so a FTSE Tracker would have fallen by twice as much as your pension (then add charges). As your pension has only fallen by half this amount it would indicate some good diversity that has protected you from half of this fall (after charges, too).
Taking a snap-shot over short periods is often not helpful, these are long term investments (by the way the FTSE has virtually recovered since May so much of your loss should have too).
Consolidating various smaller schemes into one pot is often a good idea as you can see everything in one place. Have a look at something like YouInvest from AJ Bell. You can move all your pensions over for free and then pick a selection of low cost Exchange Traded Funds to build a portfolio you are happy with, or select an fully managed investment option (I would recommend one that uses passive investments to reduce costs) or ask an adviser to make a recommendation for you for a fixed fee.
It is not difficult to do it yourself though, the simplest way is to put 60%-70% in a Vangaurd Global Equity ETF and 30%-40% in a Vangaurd Global Bond ETF and let them run. This is very low cost - so your pension is not losing a lot of money to charges.
A lot depends upon your age now, how long you have to invest and what you want to do with the money at retirement. You have to consider your capacity for risk/reward as well. Give us some more info on your circumstances and plenty of people here will be happy to give you their opinions.
Cheers
Edited for typo and to highlight what Ozzie said about checking for any benefits your current pensions may have that you would lose if you consolidated them.
Edited by JulianPH on Sunday 25th September 11:30
My current work scheme has a 15% contribution going in and seems to grow a little bit each year, but some of the schemes I stopped contributing to 10+ years ago are not worth much more now than they were back then!
JulianPH said:
How much of the 15% contribution to your work scheme is made by your employer? This seems a sensible level and if they will make further contributions if you do I would max this out as much as you can afford. It is free money.
With your old schemes I would call each provider and ask if you have any additional benefits you may not be aware of (guaranteed annuity rate, minimum guarantees, etc.) and also check there are no exit/transfer charges (sometimes it helps to ask for a current value and then ask for a transfer value - the two may not necessarily be the same, despite them telling you there are no exit/transfer penalties!).
If you do have any additional benefits then you need to weigh up whether you are better to stay put or better to start afresh. Post back here if you are not certain about anything.
If you do consolidate and start anew then with at least 25 years for investment you could afford to take a higher degree of risk now, lowering this as you approach retirement.
For the cheapest and simplest solution you could go with a Vangaurd 80(equity)/20(bond) lifestyle fund and move to 60/40 and then 40/60 as you get closer to retirement. With five years to go you should know what you want to be doing with this pension money (income drawdown, withdrawal, annuity, combination).
If you need a lump sum for withdrawal (tax free cash and annuity purchase) you could look at the 20/80 strategy to really reduce volatility in the final few years. For money you want an income from start looking for a good income investment (again a mixture of equity income and bonds) ahead of drawing the income. I believe it is prudent to only draw in any year the income generated in the previous year - so you do not erode your pot. Remember to leave some invested to account for inflation too.
You could look instead to pay extra for a fund manager or model portfolio service from a DFM (which is basically exactly what you would get from full on DFM at half the price) to run your pension money. Neil Woodford has a fantastic track record for generating income and growth and really adding value for his fee.
You may also want to keep a small part of your funds aside for self investing into specialist funds/ETFs/stocks. This can be interesting and fun if you do your research and stick with what you know! Look at your employment sector - any investment opportunities you can see and understand? The same with your general interests. Stick with listed companies/bonds though and/or regulated investments.
The whole thing can be very interesting when you get into it, and very satisfying too.
Finally, if you take the time to learn about the different tax wrappers (pension/SIPP/ISA being the main ones) and the investment options available to you you shouldn't need to pay a financial adviser, but if you do need to make sure it is a fixed fee for the hours spent.
I have never understood why people agree to pay away a proportion of their entire investment portfolio each and every year for advice. It's like paying away a proportion of the value of your house every year to get advice about what improvements could make it worth more when you sell it!
Thanks Julian for the interesting and detailed reply. I am going to spend some time looking into this over the weekend.With your old schemes I would call each provider and ask if you have any additional benefits you may not be aware of (guaranteed annuity rate, minimum guarantees, etc.) and also check there are no exit/transfer charges (sometimes it helps to ask for a current value and then ask for a transfer value - the two may not necessarily be the same, despite them telling you there are no exit/transfer penalties!).
If you do have any additional benefits then you need to weigh up whether you are better to stay put or better to start afresh. Post back here if you are not certain about anything.
If you do consolidate and start anew then with at least 25 years for investment you could afford to take a higher degree of risk now, lowering this as you approach retirement.
For the cheapest and simplest solution you could go with a Vangaurd 80(equity)/20(bond) lifestyle fund and move to 60/40 and then 40/60 as you get closer to retirement. With five years to go you should know what you want to be doing with this pension money (income drawdown, withdrawal, annuity, combination).
If you need a lump sum for withdrawal (tax free cash and annuity purchase) you could look at the 20/80 strategy to really reduce volatility in the final few years. For money you want an income from start looking for a good income investment (again a mixture of equity income and bonds) ahead of drawing the income. I believe it is prudent to only draw in any year the income generated in the previous year - so you do not erode your pot. Remember to leave some invested to account for inflation too.
You could look instead to pay extra for a fund manager or model portfolio service from a DFM (which is basically exactly what you would get from full on DFM at half the price) to run your pension money. Neil Woodford has a fantastic track record for generating income and growth and really adding value for his fee.
You may also want to keep a small part of your funds aside for self investing into specialist funds/ETFs/stocks. This can be interesting and fun if you do your research and stick with what you know! Look at your employment sector - any investment opportunities you can see and understand? The same with your general interests. Stick with listed companies/bonds though and/or regulated investments.
The whole thing can be very interesting when you get into it, and very satisfying too.
Finally, if you take the time to learn about the different tax wrappers (pension/SIPP/ISA being the main ones) and the investment options available to you you shouldn't need to pay a financial adviser, but if you do need to make sure it is a fixed fee for the hours spent.
I have never understood why people agree to pay away a proportion of their entire investment portfolio each and every year for advice. It's like paying away a proportion of the value of your house every year to get advice about what improvements could make it worth more when you sell it!
The 15% is the maximum that my employer will contribute. In all the pension schemes I have had, I have always made sure I am getting the maximum employer contribution - as you say it is free money! I have never paid in any more than that as the returns have been so poor.
I totally agree with you about paying a percentage of the full fund value - that really seems like money for nothing. I'd be happier paying a percentage of the amount of money the fund actually increases by as it would incentivise the fund managers to actually make some profit for me!
JulianPH said:
If you are getting a 15% pension contribution from your employer you are laughing. If you have been getting this since you started working and making the same contribution you are on your way to a 2/3rds final salary equivalent.
The simple fact in life is that if you don't save 1/3rd throughout your working life you will never be able to get 2/3rds in retirement. With a 15% employer contribution and your savings to date it looks like you are on your way... Bloody well done!
It is an excellent contribution, but only started this year when I turned 40! Before that I have got a few years where they contributed 12%. Earlier in my career it was often more like 6% (3% each from me and my employer).The simple fact in life is that if you don't save 1/3rd throughout your working life you will never be able to get 2/3rds in retirement. With a 15% employer contribution and your savings to date it looks like you are on your way... Bloody well done!
I haven't looked at how my current employers scheme is doing (and in the past it hasn't been as bad as the earlier ones), but if it keeps around 0-1% return, it still won't add up to that much despite the healthy amount going in.
basherX said:
sidicks said:
Trabi601 said:
oyster said:
15% employer contribution?????
Mine do 20% if i put in 7.5% 
basherX said:
It is the case. The scheme has only been running three-ish years (new hires got DB before that) and the higher rate uptake as a percentage of the total is gradually increasing but not that quickly. We'll see where it settles. If staff don't elect for the higher rate they get 15% employer on a 5% employee contribution so the basic rate's hardly shabby. Nonetheless I still don't see why people wouldn't take the additional 5%.
Indeed. The basic rate is very good as it is which probably doesn't help with the uptake, but anyone not taking this is giving away free money that is part of their package.JulianPH said:
If you are getting a 15% pension contribution from your employer you are laughing. If you have been getting this since you started working and making the same contribution you are on your way to a 2/3rds final salary equivalent.
The simple fact in life is that if you don't save 1/3rd throughout your working life you will never be able to get 2/3rds in retirement. With a 15% employer contribution and your savings to date it looks like you are on your way... Bloody well done!
I am not laughing so much now! The pension scheme that pays the 15% sent me their statement today - they have lost 8% of my fund as well! The simple fact in life is that if you don't save 1/3rd throughout your working life you will never be able to get 2/3rds in retirement. With a 15% employer contribution and your savings to date it looks like you are on your way... Bloody well done!
Is there any way I can move out of my current employers scheme without losing the contribution?
Ginge R said:
Christ, what are you invested in, and who runs it? Unless you're indispensable to the firm, or senior enough to have influence, I very much doubt it.
Punter Southall have invested it in the 'L&G Global Equity Current Hedged (50:50)' fund. There are quite a number of other options to look into, so I will at least try to diversify it a bit to see what does best.Ginge R said:
I Iike L+G, they're making lots of all the right noises with their Multi Asset/Multi Index funds. Your's isn't exactly stellar, but it's not a complete basketcase either. I'd be interesting to learn how it turned an 8% loss, surely not on scheme and additional PS overhead, because, on the surface of it, it's as cheap as chips, so there may be other factors you don't know about. Did you go in at an inopportune time, what was the period of the 8% loss?
It might be that if you move the goalposts by just a few weeks, the picture is very different. It's not just one year snapshots that count, Tn shows strong 5 year growth for the fund, is that reflected in your fund value? I'd be cautious of doing major tweaks with it now, unless you have a completely new life-stage strategy in mind. Equities are pretty much on the ceiling, there's nothing out there which could signify that growth will continue in the manner we've recently become accustomed to.
Equity and bond returns are becoming more correlated and could fall in unison, if we're finally seeing the demise of central bank intervention through QE (and the suppressed volatility which that bought), and a bitterly divisive and uncertain post US election outlook, it may be rocky again for a bit.
https://www.trustnet.com/Factsheets/Factsheet.aspx...
Thanks.It might be that if you move the goalposts by just a few weeks, the picture is very different. It's not just one year snapshots that count, Tn shows strong 5 year growth for the fund, is that reflected in your fund value? I'd be cautious of doing major tweaks with it now, unless you have a completely new life-stage strategy in mind. Equities are pretty much on the ceiling, there's nothing out there which could signify that growth will continue in the manner we've recently become accustomed to.
Equity and bond returns are becoming more correlated and could fall in unison, if we're finally seeing the demise of central bank intervention through QE (and the suppressed volatility which that bought), and a bitterly divisive and uncertain post US election outlook, it may be rocky again for a bit.
https://www.trustnet.com/Factsheets/Factsheet.aspx...
The loss was made over a period of April 2015 to April 2016. I'll have to check the previous statements, but I have been in the scheme for about 6 years, and judging by the total balance it has averaged about a 6% growth up until now.
If it is just a one off, I am not too worried but just aware that I can't afford too many like that!
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