Should I be worried about my pension?

[t1grm]

Just checked my pension plan and 13 years in it's only 8% up on what I've contributed. Should I be worried or is that normal for about half way through it's life? I know spot valuations aren't a true reflection of your final pension and that it grows more towards the end but 8% over 13 years seems pretty rubbish to me.

Most of the increase has come from one fund which is up 43% The others are all single digit or negative. Even the balanced managed fund is -2% over the life of the pension and that's supposed to be the low risk one that I'm putting 50% into.

My financial adviser is next to useless. He only meets me when I chase him for about 6 weeks and then just seems to pick a couple of funds at random and tells me to switch to get me off his back. Last time I even had to do the switch myself as I gave up chasing him for the paperwork.

If I go to a new IFA he'll just try to sell me a new pension. Last time I did that I ended up with this one plus the old one just got eaten up by charges as I closed it early.

I'm starting to get worried now as I already got shafted on an Abbey Life pension which is worthless but fortunately was only in it for 2 years. This one I've had for 13 years and I'm running out of time to sort things out.

[t1grm]

drainbrain said:

Your story is so depressingly common that it would probably be fair to say it's typical.

Pretty much mirrors my experience, tho' if it's any consolation your 8% beats mine. Mine managed to have grown to be the same as I'd put in after 13 years including the mythical tax incentives. So yeah, yours is pretty good really.

The problem is, we (and there are multitudes of us) don't really know what we're doing.

I have come to accept this as the problem which has led to our disappointment.

We thought that all we had to do was keep up the contributions, usually as advised by the salesman, and some big-brained Mekon in a London office full of screens and telephones would move our money around and make sure it grew at a reasonable rate, compounding into an adequate enough wedge to ensure we lived like normal human beings when we were too old to work.

This is NOT how it works. Actually nobody knows how it works, and if they do they're not telling. There's another school of thought which says it just doesn't work at all (except by chance or fortune). I kind of tend towards that latter camp.

However. It can be assumed that you do something well enough for it to produce the ability to make the contributions in the first place. MY advice ( assuming you can't get directed to the Magic Pension Money Tree ) is use your money to do more of what you already do successfully.

Hopefully that's an option for you. It certainly worked for me, and I have no regrets in putting very little faith in private pension plan contributions as a way to ensure anything more than a (in my case very small) part of funding retirement.

(There will be other opinions on the matter).

You've come to basically the same conclusion I've come to. Gutting isn't it?

[t1grm]

ringram said:

In all likihood your are being raped on fee's
Go into detail on the costs and review what you are spending your money on.

You might/likely will be better off moving it into a SIPP where you can run at close to zero cost instead.

I've got a handle on fees. I get a transaction listing of all the buys and sells each year (which they don't provide - I have to ask for it) and track in it an accounting package. The fees aren't that bad compared to what my old (shut down) pension is charging. It just seems to be genuinely poor performance.

Transferring is not an option as I'll loose a huge chunk in surrender value. My thoughts at the moment are to shut it down, take a hit on the ongoing fees that will attract, and put the contributions into a low risk tracker fund. Can't do any worse than the pension is doing now.

[t1grm]

NRS said:

What funds do you have and what are the charges on them? Also how old are you (for understanding like risk you should have)?

These are the funds I'm in:

OMI IM EUR BALANCED
OMI IM USD BARING E EUROPE EUR
OMI IM USD INV ASEAN EQ EUR
OMI IM EUR HSBC EUROLND EQ
OMI IM USD BLACKROCK LATAM EUR
OMI IM USD FID GLOBAL DIV EUR

Charges seem to average about £10 a month. Of course I can't see what charges are included in the fund prices. Just what is deducted by selling units. I'm 44.

Edited by t1grm on Tuesday 10th January 14:29

[t1grm]

trickywoo said:

Thats your problem. From its peak in June 2015 its down near enough 30%. Its one thing to hang in and not sell but another entirely to continue pouring 50% of your contribution in.

I'd reassess that soonest.

Yeah maybe I need to look at that. The thing is that was supposed to be the low risk "banker" where I put the 50% to be left alone. Then I can chop and change the other 50% into stuff more high risk. Great strategy that turned out to be. And the IFA never even looked at it. He just focused on swapping the higher risk 50% into new funds each time we met.

Next question is do I try and set up a meet with the IFA and explain I want out of OMI IM EUR BALANCED or just pick a low risk fund that's doing well and make the switch myself? Can't see it being that difficult and at least the blame is on me if I get it wrong. The IFA seems to have got it wrong already.

Edited by t1grm on Tuesday 10th January 16:47

[t1grm]

mcbook said:

You need to figure out your fees in percentage terms. What % management charge are you paying annually? What other fees are you paying annually? What you've said so far doesn't really answer that question.

How do I find that out? The only info I have on fee's are the sell transactions that are made each month and listed as maintenance fee. That's about 1% of contributions. The other fees are incorporated into the fund price and are opaque to me.

[t1grm]

Sorry should have added I'm an ex-pat and this is an offshore pension. Hence the reason it's all in Euros. Pension is in IOM, I'm in Malta, IFA is registered in Luxembourg I think but I generally liase with their Brussels office because that's where I was working when I took the pension out.

I assume the correct authority to complain to would be IOM since that is where the pension is based but would they be able to take any sanction against a Luxembourg based IFA?

[t1grm]

Great. So looks like I've been shafted - again. Problem is no UK firm will touch me because I'm an ex-pat. I had a UK pension but I was told I couldn't contribute to it anymore because I left the UK. So if I can't get a UK pension and everyone dealing with ex-pats is on the make what do I do for a pension (apart from move back to the UK)?

Looks to me like I'm either stuck with shovelling money into a pension that will never give a decent return or just cut my losses, stop contributing, put the contributions into something else I can manage myself and accept I will loose most of my investment to date in charges.

[t1grm]

DonkeyApple said:

You're focussing on the wrapper rather than the products in it and the people managing it. The problem is the latter. Even if your wrapper is expensive it won't be the cause of your poor returns. That lies at the feet of the managers and their selections.

Right, but then if funds are performing poorly because of the managers selection shouldn't my IFA be suggesting alternative funds?

[t1grm]

DonkeyApple said:

Do you have an IFA? I thought it was some chap in Europe?

I was under the impression the chap in Europe was an IFA. In fact it was a company not a chap: http://www.pic-europe.com/ The chap who sold me the pension has since left the company and I've been dealing with someone else.

DonkeyApple said:

But the point I was making was that what seems to be the problem is the entity that you chose to manage your money and that is what should be the key focus at the moment. The wrapper itself is somewhat secondary.

The massive flag for me is that it reads as if 50% of your portfolio is very highly actively managed and yet you have no regular meetings/discussions and when you do the core 50% holding is glossed over. It just reads like your being children need for comms and that is where all your performance has gone.

I wouldn't say anything is being actively managed. I've only met them 3 times.

I took the pension out in 2003 and specified 50% low risk and 50% a bit more risky. So we set it up to be 50% into OMI IM EUR BALANCED (supposedly low risk) and a 25/25 split into OMI IM USD BARING E EUROPE EUR and OMI IM USD INV ASEAN EQ EUR (higher risk).

Since then I've had two meetings with them in 2011 and 2015 both at my instigation. In 2011 we switched out of IM USD BARING E EUROPE EUR and OMI IM USD INV ASEAN EQ EUR and put 50% into OMI IM USD BLACKROCK LATAM EUR.

When that fund bombed (-13% in 4 years) I called another meeting in 2015 and switched OMI IM USD BLACKROCK LATAM EUR into a 25/25 split between OMI IM EUR HSBC EUROLND EQ and OMI IM USD FID GLOBAL DIV EUR. That's only been going 18 months so it's difficult to gauge so far.

I never intended to be swapping funds all the time. I just wanted a regular pension. I'm not really into tracking markets or anything like that. I only called the first meeting because I hadn't spoken to anyone for 8 years and the second meeting because the fund I switched to bombed. Now the IFA (or whatever you want to call them) don't even return my calls or answer my emails. So looks like I'm high and dry.

Edited by t1grm on Wednesday 11th January 11:11

[t1grm]

Yeah sort of what I guessed. I googled the name of the guy who originally sold me the pension, and has since left, and got several hits linking him to some dodgy ex-pat pension deals in Thailand. No surprise there. Obviously a bunch of fly by nighters.

On the subject of fees I found the following:
7% bid/offer spread
1% annual management charge
8.60 EUR monthly maintenance - since gone up to 10.50

I assume that is on top of the AMC quoted for the individual funds? Am I right in thinking the bid/offer spread goes to the intermediary?

I should add they are topping up my contributions by 2% each month (and by 15% for the first two years) so that offsets some of it.

Thanks for your help BTW

[t1grm]

sidicks said:

You appear to have been badly (and expensively) advised, but that's clearly not your fault.

As far as the funds are concerned, the poor performance that you highlight is not necessarily the manger's fault - you need to compare this against the benchmark for the market in which they were invested.

Yeah did that. For the balanced managed fund 5 year gain is 8.17% for the fund vs 49.51% for the category so pretty heavily underperforming.

sidicks said:

In volatile / risky funds such as those you are invested in, you would expect more ups and downs, and cashing out after a down is rarely the best strategy.

I haven't cashed anything out. I've just stopped contributing and have switched future contributions to new funds. I still have the units in the underperforming funds in the hope they might go back up eventually.

sidicks said:

If the underlying fund managers aren't at fault it might well be that the IFA who is allocating your portfolio is very much at fault, either being in the wrong things at the wrong times or for not better matching your risk appetite to the investment strategy (or both).

One possible strategy would be to try and switch into (cheap) passive equity portfolios, maybe 50% EU 50% World Ex Europe and be prepared to sit on this for a number for years, riding out the ups and downs.

Also, if you aren't getting any service from your IFA then it's not clear you should be paying the €10 monthly fee!

The 10 EUR monthly fee is being deducted by the pension company so I don't think they are interested in what the intermediary is doing. I complained to the pension co about the intermediary ages ago and they didn't want to know, saying it's nothing to do with them. I asked them if I could switch intermediary and they said no problem but it's down to me to find one then let them know who it is. I asked for a list and they said they could only provide a list of UK registered IFA's which is no good because I'm an ex-pat - go figure. I doubt very much I will find a new intermediary that will take on managing an existing pension (unless I pay them directly) as there is simply no financial benefit to them and, quite frankly, after this I don't trust any the offshore intermediaries.

The thing is, I don't think I've got a fundamentally bad pension. As far as I am aware Old Mutual is a well established and respected financial company even if the intermediary that sold me the pension was a shark. Yes the fees are a bit higher than a UK pension but offshore financial products are generally more expensive and, as others have said, the higher fees are not enough to account for the all of the poor performance of the pension. The problem is I seem to be in the wrong funds and the intermediary either doesn't want to know or can't be bothered. So I'm stuck with just trying to work it out myself and winging it or shutting it down, taking a hit on fees and going for something else. The question is whether the next one would be just as bad as the one I would have just jumped out of. The whole area is a minefield quite frankly.