Pension fund performance - do you monitor yours, how is it doing, do you actively change it?

katy81 said:
I'm in my early 40s. Probably paid in to like 4 or 5 company pensions. No idea how to sort it.

I'll just work till I drop I expect.
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<not financial advice>
Please do something about it because you still have plenty of time. If you can help it, do not plan to "work until you drop" because I've seen an alarming number of people (including work colleagues) drop dead in their 50s before retiring and enjoying the fruits of their labour.

It's really not that difficult to check up and if desired, consolidate it all yourself with something like Vanguard, Pensionbee etc which will do all the transfers for you if you feed in the details. If you're struggling for details then you can use the free pension tracing service to find pensions from past employers:

www.gov.uk

Find pension contact details

Find the contact details for a pension provider by using the Pension Tracing Service
www.gov.uk www.gov.uk

If consolidating, you will need to assess your level of risk tolerance, target date for drawdown/annuity and pick a fund or funds based on that. If you're really not confident and the sums involved are enough to justify it, you should get financial advice otherwise there's plenty of useful info on reddit's r/ukpersonalfinance for example. Alternatively you may just decide to keep all the details safe and let them keep running if they are doing OK but this will probably cost more in fees in the long run.

But yeah, at least take an interest because you still have time on your side :)
 
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NotAGolf said:
Thanks for this. I didn't know this was an option.

My current provider is The People's Pension. As others have mentioned, their fees are quite high and the fund options are limited. It looks as though they don't allow transfers out either, although I've emailed them to confirm this.

I've merged all of my older jobs into my last employers one (Legal and General), but I didn't consider transferring out of that into my own SIPP. Fees aren't too bad with L&G (0.35% annual management charge +0.13% for the fund), but there are cheaper options around. This has definitely prompted me to look around.

I'm 37 with a pretty measly pot. I've always contributed, but was low paid up until the last 5 years or so, and none of my employers have ever paid above the bear minimum.

My happy to go very high risk as retirement is a fair way off.

I also save into a S+S Isa and have built up a decent chunk in that. This is primarily a buffer for emergencies, but if I don't dip into it, will hopefully allow me to retire earlier by living live off it for a few years before having to break into my pension.
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Give them a ring first to see if you can move it with details here. Mine said something similar via their web chat and when rung they said it was possible to do a partial transfer and leave a % behind in the pot. So worth a try.
 
NotAGolf said:
That's the problem, I'm still paying in (and would like to continue to do so to get my employer contributions).
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Yeah, I'd be clear when you're asking them that you're not asking whether you can completely close the pension, you're asking if you can make a partial transfer out.

A friend of mine has a pension where they've been categorically told that the only transfer they permit is to fully transfer and close the entire account, which is a non-starter as they're still paying into it through their employer.

But I think most will allow partial transfers out. My current employer scheme certainly does.
 
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Had a another good look through my available funds today. There isn't a world tracker so I would have to go for three separate funds - a UK equities, an emerging markets, and a developed world ex-UK index.

Here's the performance of the three funds over the past 14 years.

Emerging markets isn't doing too good is it. I know diversification, past performance no clue etc, but is it even worth including this?


tuLFNWW.png
 
danlightbulb said:
Had a another good look through my available funds today. There isn't a world tracker so I would have to go for three separate funds - a UK equities, an emerging markets, and a developed world ex-UK index.
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This is the correct approach. The key is to correctly balance your distribution, emerging markets are going to be about 11% of your entire investment portfolio, your largest pot will be in developed world ex-uk at 80% or more.

I'm in three Vanguard funds that do just that - Vanguard Emerging Markets +13.14% growth over the past five years, Vanguard FTSE Developed world excluding UK +84.90% growth over the past five years (yes really!) and Vanguard FTSE UK All Share index +38.58% growth over the past five years. The past five years has been exceptional for equity growth in index funds.
 
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Moley said:
This is the correct approach. The key is to correctly balance your distribution, emerging markets are going to be about 11% of your entire investment portfolio, your largest pot will be in developed world ex-uk at 80% or more.

I'm in three Vanguard funds that do just that - Vanguard Emerging Markets +13.14% growth over the past five years, Vanguard FTSE Developed world excluding UK +84.90% growth over the past five years (yes really!) and Vanguard FTSE UK All Share index +38.58% growth over the past five years. The past five years has been exceptional for equity growth in index funds.
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Yeah so something I'm a bit uncertain about is how to set the percentage. I believe that currently, if mirroring the distribution of world equity I would go 11% emerging markets, 5% UK, and that leaves 84% in the rest of the world covered by the world ex-uk fund.

But a single world fund would automatically rebalance as the world changes right, so let's say China goes on a sudden bull run, a proper world fund would automatically mirror that, but my three fund split wouldn't.

How do I ensure that my three fund split continually mirrors world equity in the right proportions?
 
danlightbulb said:
How do I ensure that my three fund split continually mirrors world equity in the right proportions?
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You don't. You set a reasonable schedule to rebalance - one a year at most. I'm not going to repeat how to figure out the weightings in this thread when the article I used to setup my investment explains it better than I ever could.

DIY Global Tracker - UKPersonalFinance Wiki

Context: This article was originally written a few years ago, when low-cost world index trackers were not widely available. The complexity of running your own DIY global tracker is now likely not worth the much smaller fee saving. You may have read threads in the subreddit, or other sources such...
ukpersonal.finance ukpersonal.finance
 
Moley said:
You don't. You set a reasonable schedule to rebalance - one a year at most. I'm not going to repeat how to figure out the weightings in this thread when the article I used to setup my investment explains it better than I ever could.

DIY Global Tracker - UKPersonalFinance Wiki

Context: This article was originally written a few years ago, when low-cost world index trackers were not widely available. The complexity of running your own DIY global tracker is now likely not worth the much smaller fee saving. You may have read threads in the subreddit, or other sources such...
ukpersonal.finance ukpersonal.finance
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Ah great thanks, this was posted earlier wasn't it, I knew I'd seen something but I've been watching/reading so much stuff on the topic last few days, I couldn't remember what I've seen where.

I'm still uncertain about bonds. I've watched some videos and podcasts from Pensioncraft, James Shack, Meaningful Money and Damien Talks Money; and whilst these people do seem to advocate a 100% global tracker approach, they also talk a lot recently about bonds now that interest rates are higher.

So it's unclear to me whether they would now advocate some bonds in a portfolio or not.
 
Interesting thread, lots of great insight.

I've never much paid much attention to my pension, happy for those that are meant to be skilled (and paid to do so) to look after my pension. Looks like that wasn't the wisest decision going by this thread. I've been paying in to one for over 33 years already and as I want to retire early I feel the need to make the next 10 years count. So I see my options being:

a. pay the mortgage off early to meet my desired retirement age and live off what I've got in my pension (least sensible option)
b. set up an ISA for the next ten years
c. make additional voluntary contributions to my existing pension until my desired retirement age

Item c makes the most sense as I'll save 42% in income tax on any amount contributed but it'll be tied up; with an ISA I can dip in to it should a critical need arise. Of course doing both b and c would be ideal but reduces the benefits of both. Still doing the numbers at the moment.
 
Mysterae_ said:
Interesting thread, lots of great insight.

I've never much paid much attention to my pension, happy for those that are meant to be skilled (and paid to do so) to look after my pension. Looks like that wasn't the wisest decision going by this thread. I've been paying in to one for over 33 years already and as I want to retire early I feel the need to make the next 10 years count. So I see my options being:

a. pay the mortgage off early to meet my desired retirement age and live off what I've got in my pension (least sensible option)
b. set up an ISA for the next ten years
c. make additional voluntary contributions to my existing pension until my desired retirement age

Item c makes the most sense as I'll save 42% in income tax on any amount contributed but it'll be tied up; with an ISA I can dip in to it should a critical need arise. Of course doing both b and c would be ideal but reduces the benefits of both. Still doing the numbers at the moment.
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If you are in shooting distance (up to you to decide :)), do item C, then tax free lump sum and clear the balance.
 
dlockers said:
If you are in shooting distance (up to you to decide :)), do item C, then tax free lump sum and clear the balance.
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Indeed, that's what I'm trying to work out :). The figure I have in my head is 10 years more of work, so 10 years in to an ISA or extra pension contributions, both geared towards the higher end of risk. At the 10 year mark, take the 25% tax-free lump sum and liquidate other assets to clear the mortgage, live off the pension. There's too many assumptions in my calculations at the moment though!
 
dlockers said:
If you are in shooting distance (up to you to decide :)), do item C, then tax free lump sum and clear the balance.
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This sounds good, but isn't always good advice especially if retiring early. For example:
  • Taking your 25% tax free as you draw down instead of taking lump sum might keep you from entering a higher tax band, potentially saving you a lot more in tax than you pay in mortgage interest.
  • Keeping (most of) the tax free cash invested means it will likely continue to grow
 
EvilRob said:
This sounds good, but isn't always good advice especially if retiring early. For example:
  • Taking your 25% tax free as you draw down instead of taking lump sum might keep you from entering a higher tax band, potentially saving you a lot more in tax than you pay in mortgage interest.
  • Keeping (most of) the tax free cash invested means it will likely continue to grow
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Can you explain the first bullet point please, EvilRob?

I think you mean reducing the pension pot means getting less pension each month so avoiding certain tax brackets?
 
Mysterae_ said:
Can you explain the first bullet point please, EvilRob?

I think you mean reducing the pension pot means getting less pension each month so avoiding certain tax brackets?
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No not that but same idea to reduce tax liability.
You have the option to take the 25% tax free in a lump sum. But you can choose when you take it and how much you take at a time. So, one strategy is to take 25% tax free every time (each month?) you make a drawdown on your pot.
Example:
  • Let's say I decide to draw down such that my total pension income for the year is £60k from all taxable income sources
  • Normally, I'd pay £11,428 tax on that
  • However, let's say the amount of my pension pot I'm drawing down to get to that £60k is £40k a year.
  • If I choose to take my 25% tax free pension allowance as I draw down, I'll only pay tax on 75% of that £40k, so my total income for tax purposes will be £50k instead of £60k.
  • That takes me out of the 40% tax bracket and I'll only pay £7,474 tax on the £60k.

OK, 60k sounds like a very high income but with tax brackets not changing with inflation causing fiscal drag, more and more people will be caught in the 40% tax bracket in retirement. And it applies to 20% threshold too.

One of, if not the, key elements of a good pension investment strategy is minimizing the overall tax you pay on the way in and the way out. Taking a 25% tax free lump sum up front can run counter to that.
 
Thanks for explaining it @EvilRob , that sounds like a very effective method of reducing tax at retirement/pension!

Fiscal drag and how much I withdraw from my pension will definitely have an impact and more so because of the Scottish tax rates and bands. Setting the right amount can mean saving thousands in tax just like in your example.
 
EvilRob said:
No not that but same idea to reduce tax liability.
You have the option to take the 25% tax free in a lump sum. But you can choose when you take it and how much you take at a time. So, one strategy is to take 25% tax free every time (each month?) you make a drawdown on your pot.
Example:
  • Let's say I decide to draw down such that my total pension income for the year is £60k from all taxable income sources
  • Normally, I'd pay £11,428 tax on that
  • However, let's say the amount of my pension pot I'm drawing down to get to that £60k is £40k a year.
  • If I choose to take my 25% tax free pension allowance as I draw down, I'll only pay tax on 75% of that £40k, so my total income for tax purposes will be £50k instead of £60k.
  • That takes me out of the 40% tax bracket and I'll only pay £7,474 tax on the £60k.

OK, 60k sounds like a very high income but with tax brackets not changing with inflation causing fiscal drag, more and more people will be caught in the 40% tax bracket in retirement. And it applies to 20% threshold too.

One of, if not the, key elements of a good pension investment strategy is minimizing the overall tax you pay on the way in and the way out. Taking a 25% tax free lump sum up front can run counter to that.
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It's a good example but pensions are very nuanced and need a lot of care in managing.
This guy on Youtube has some good examples of how to think about this stuff.

 
I monitor mine on a quarterly basis for valuation, though my FA deals with the management according to my risk profile. Over the 7 years I have been tracking, it's at 104% growth, which is not bad all told I guess (will be a while before I need to use it after all).

My main pension is technically a SIPP because of how things worked out previously. I then have a separate company pension through my employer. When I change employer I roll that into the main and start again.
 
Very interesting thread. My workplace pension is with Aviva and has performed poorly for the last 5 years, barely making anything. I have now adjusted it to 50/50 split on the original fund and US high risk, will do a bit more research and see how it changes things over the next year. I have also more than doubled my contribution by switching to salary sacrifice and upping the contributions the last few months.
 
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