Pension Performance
Discussion
After a cancer scare last year I took the plunge in October and retired at 60. I consulted an IFA and consolidated my pension pots and transferred my S+S ISA's. I get a monthly income for bills and day to day expenses and can take money from the ISA for holidays etc. I'm concerned as the value of the investments has lost nearly £20k. I know the value can go down as well as up but this much in 5 months seems a lot. If it carries on at this rate I'll be looking for another job.
Markets have dropped slightly since the end of the year, but that's nothing compared to the 30% drop in Feb and Mar 2020 at the start of the pandemic.
Your IFA should have prepared you for this.
It only becomes a problem if the market drops means you can no longer meet you retirement income needs.
Your IFA should have prepared you for this.
It only becomes a problem if the market drops means you can no longer meet you retirement income needs.
Spydaman said:
After a cancer scare last year I took the plunge in October and retired at 60. I consulted an IFA and consolidated my pension pots and transferred my S+S ISA's. I get a monthly income for bills and day to day expenses and can take money from the ISA for holidays etc. I'm concerned as the value of the investments has lost nearly £20k. I know the value can go down as well as up but this much in 5 months seems a lot. If it carries on at this rate I'll be looking for another job.
£ values are dependent on pot size really.Percentage wise my S&S ISA has dropped ~5% over that same 5 month period. There's little to no bond holdings or cash in there, purely shares, funds and some ETFs. If your total pot is >£400k, your investments have performed better. If its <£400k, they have performed worse.
Percentage wise my pension has dropped ~1.7% over that same 5 month period. There's some bond holdings in there, along with mostly medium-high risk funds. That percentage manifesting a £20k drop in value would require a pot approaching £1.2m by my math.
Spydaman said:
I should have been more clear. The pension has lost about 2.7% and the ISA 3.5%
Yes, some funds/investments have lost that, some a lot more and some less. Longer term trends are always up however, your IFA should have braced you for falls and planned accordingly.Did you have a question, wondering what if it keeps falling or something else?
Spydaman said:
I should have been more clear. The pension has lost about 2.7% and the ISA 3.5%
Sorry, wasn't trying to be a clever dick, my post came across a bit that way.Looking at those percentages against mine, it doesn't look off hand like they're massively out of kilter with where the market has gone as a whole. Did the IFA provide any literature or modelling on how the plan was pulled together for your consolidated investments covering this kind of thing? Like a best case, worst case, most likely overview?
[I've never taken financial advice in this area so don't know what's typically included]
Spydaman said:
After a cancer scare last year I took the plunge in October and retired at 60. I consulted an IFA and consolidated my pension pots and transferred my S+S ISA's. I get a monthly income for bills and day to day expenses and can take money from the ISA for holidays etc. I'm concerned as the value of the investments has lost nearly £20k. I know the value can go down as well as up but this much in 5 months seems a lot. If it carries on at this rate I'll be looking for another job.
Spydaman said:
I should have been more clear. The pension has lost about 2.7% and the ISA 3.5%
Firstly, I hope your health is going better now - sorry to hear of the scare.Without knowing any detail of what your funds are actually invested in....
As a general comment, I'd say your funds must be reasonably cautious, and those losses sound pretty small given the state of things over the past few months!
https://tinyurl.com/ekrxhtdw will show you how things have been since 29-Oct-21
FTSE100 is the only + index there - up 2.9%
DOW down 5.1%
S&P500 down 5.7%
NASDAQ down 11.5%
I have some Baillie Gifford American.....down 38% - that is a proper OUCH factor!
Of course, if you have already been taking some funds out since then, that lowers the value too
Perhaps speak with your IFA - I am sure they would be happy to have a conversation - this is why you pay them! Let us know what they say.
You need to be prepared for losses (hopefully temporary) of ten times that magnitude. If you're not you should secure some more of your income through an annuity. The rates suck but you've got to compromise one way or the other.
The most important thing is to avoid finding yourself having to sell down lots of holdings at a large loss. Income yields are variable and not guaranteed, whilst capital returns/losses are downright unpredictable.
With a big pot you can have a cash buffer, some shorter term investments taking low risk to use over the next 5 years and some longer term investments with a decent equity weighting to achieve the on average above inflation returns you need to make the whole thing sustainable.
The most important thing is to avoid finding yourself having to sell down lots of holdings at a large loss. Income yields are variable and not guaranteed, whilst capital returns/losses are downright unpredictable.
With a big pot you can have a cash buffer, some shorter term investments taking low risk to use over the next 5 years and some longer term investments with a decent equity weighting to achieve the on average above inflation returns you need to make the whole thing sustainable.
Spydaman said:
Thanks all for the reassurance. I was aware there would be ups and downs but the amount in such a short time was bit of a shock. I’ve written to the IFA to get some reassurance off him but haven’t heard anything yet but he’s probably busy reassuring his other clients.
I don’t think his other clients will be requiring reassuring. A 3.5% drop should be expected if you’re invested in equities. I know the face value of £20k down is alarming, but it is part and parcel of investments. Realistically you can’t expect your IFA to have gone up when everyone else is down. You could ask to be put in a very low risk offering, which would likely not have such dips, but then you’d also likely miss out on any 6% rises.
You need to find an acceptable level of risk, but also you need to be comfortable weathering the dips.
Panamax said:
Spydaman said:
I should have been more clear. The pension has lost about 2.7% and the ISA 3.5%
You need to have a strategy that can cope with 20% drops.Shnozz said:
What I would give to be in Spydaman's position! 2.7% and 3.5% in the climate in the last 5 months is a spectacular result. Mine is over 20% down in that time.
Lot depends on the adventurousness of the portfolio. vwrl is 3% down on the last 6 (quickest to get figures for) months for example.Edited by xeny on Tuesday 22 February 16:13
Shnozz said:
What I would give to be in Spydaman's position! 2.7% and 3.5% in the climate in the last 5 months is a spectacular result. Mine is over 20% down in that time.
Don't know where mine has gone right then? I lost 1.5% last month, but that was my first lost of late. The 4 months before that were all gains. TwigtheWonderkid said:
Don't know where mine has gone right then? I lost 1.5% last month, but that was my first lost of late. The 4 months before that were all gains.
Won't take long to find out where its invested once you know the names of the funds etc. Probably something pretty low risk based on that. Or quite UK centric perhaps.okgo said:
TwigtheWonderkid said:
Don't know where mine has gone right then? I lost 1.5% last month, but that was my first lost of late. The 4 months before that were all gains.
Won't take long to find out where its invested once you know the names of the funds etc. Probably something pretty low risk based on that. Or quite UK centric perhaps.Spydaman said:
Thanks all for the reassurance. I was aware there would be ups and downs but the amount in such a short time was bit of a shock. I’ve written to the IFA to get some reassurance off him but haven’t heard anything yet but he’s probably busy reassuring his other clients.
Not sure what reassurances they can give you if you intend to stay invested in the markets. The only way to guarantee an income is to transfer to very low risk securities - or possibly even buy an annuity.The way to ride out the bumps & minimise the damage to your funds (by not drawing on them in a dip) is probably to have some cash in reserve to use in the dips.
That said, your losses seem pretty small to me. I think mine is down well over 10% since the start of the year - but it will come back.
Edited by Wombat3 on Wednesday 23 February 13:17
I spoke to my IFA and he has reassured me. His plan allows for market fluctuations much bigger than I am seeing. If it continues to lose I will stop drawing down my pension and use cash investments. Apparently it needs to lose 65% before I really need to worry. Hopefully it won't get that far as based on historical data it should never exceed 17%.
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