Wife's pensions

[-Cappo-]

MrsC has a number of pensions from various previous employments. They're all DC pensions. None of them are of particularly high value, certainly none worth investigating transferring into a SIPP.

Through no particular choice of hers, 3 of them are with the Prudential. I guess that's just who the previous employers selected to run their pension schemes.

She's had a valuation through for one Pru pension recently, and the projection from now until retirement age is dire - MINUS 1.49% p.a. with the projected future value being not much more than 50% of what it is today (she's under 55). Now we all know the mantra, investments can go up as well as down, but this seems absurd to me that they can make such a prediction without any offer of any proactive input. I guess I have two questions at present:

1. She could call the Pro, ask them where they get that from and find out whether there are options to move the money into different funds?

2. She could move all these small pensions into one, such as Pension Bee? (I'm sure there are other similar options?). Clearly the same future projections risks exist, but I can't help feeling her money could be doing better than it is?

Thoughts and suggestions appreciated.

TIA.

[steve_n]

Suggests there could be high charges as those projections are shown in real terms. Therefore part of that minus 1.49% is minus something like 2.5% for inflation. Also could be in low risk investments and they've used a lower growth rate to reflect that. It's not an accurate prediction of the current holdings' future returns.

It's so easy to consolidate pensions these days you may as well do it and get it into something costing no more than 0.5-1% all in.

[okgo]

steve_n said:

Suggests there could be high charges as those projections are shown in real terms. Therefore part of that minus 1.49% is minus something like 2.5% for inflation. Also could be in low risk investments and they've used a lower growth rate to reflect that. It's not an accurate prediction of the current holdings' future returns.

It's so easy to consolidate pensions these days you may as well do it and get it into something costing no more than 0.5-1% all in.

I did this with my wife and I pensions. Think 7 or 8 in total. All into vanguard and into a global tracker. Done.

[-Cappo-]

Thanks both, that's helpful.

Any preferences on a pension aggregator? Are Vanguard the way forward?

[okgo]

-Cappo- said:

Thanks both, that's helpful.

Any preferences on a pension aggregator? Are Vanguard the way forward?

There’s other options of course. But I’ve always found the VG platform very easy to manage. It isn’t expensive but isn’t the absolute cheapest either. But it will be peanuts vs what your wife is paying now.

[-Cappo-]

okgo said:

-Cappo- said:

Thanks both, that's helpful.

Any preferences on a pension aggregator? Are Vanguard the way forward?

There’s other options of course. But I’ve always found the VG platform very easy to manage. It isn’t expensive but isn’t the absolute cheapest either. But it will be peanuts vs what your wife is paying now.

[Puzzles]

I’m currently paying a total of 0.354% in my pension for a couple of trackers, not sure how competitive that is?

[PM3]

Puzzles said:

I’m currently paying a total of 0.354% in my pension for a couple of trackers, not sure how competitive that is?

You are paying a bit more than me for one of my former work pensions ( all things added such as platform and any charges depending on actual funds used )
You are paying a little less than me for my other SIPP

https://www.moneysavingexpert.com/savings/cheap-si...

[Puzzles]

PM3 said:

You are paying a bit more than me for one of my former work pensions ( all things added such as platform and any charges depending on actual funds used )
You are paying a little less than me for my other SIPP

https://www.moneysavingexpert.com/savings/cheap-si...

Thank you!

[Zigster]

The projections your wife has received aren’t really very helpful, other than to stop you relying on over optimistic expectations about future returns! Even with some knowledge in the area, I find the projections to be pretty useless. It’s not the Pru’s fault - they’re just following the statutory requirements.

Assuming the pensions come under the Statutory Money Purchase Illustrations (SMPI), I’m guessing your wife’s funds are calculated to be low volatility so a gross return of 2.0% is assumed. Inflation of 2.5% is then knocked off, following by charges (assumed to be 1% if future charges are not know or can’t reasonably be estimated).

Which gets you to -1.50%.

Note this is not something I do in practice so I could be wrong on the detail. Main point is that the projections of -1.50% are almost deliberately intended to be a pessimistic guide to future returns and actual returns could well be a lot higher.

[-Cappo-]

Zigster said:

The projections your wife has received aren’t really very helpful, other than to stop you relying on over optimistic expectations about future returns! Even with some knowledge in the area, I find the projections to be pretty useless. It’s not the Pru’s fault - they’re just following the statutory requirements.

Assuming the pensions come under the Statutory Money Purchase Illustrations (SMPI), I’m guessing your wife’s funds are calculated to be low volatility so a gross return of 2.0% is assumed. Inflation of 2.5% is then knocked off, following by charges (assumed to be 1% if future charges are not know or can’t reasonably be estimated).

Which gets you to -1.50%.

Note this is not something I do in practice so I could be wrong on the detail. Main point is that the projections of -1.50% are almost deliberately intended to be a pessimistic guide to future returns and actual returns could well be a lot higher.

That's a really interesting explanation, thanks.