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

200sols said:
How old are you?
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late 40s, but that's just the pvt pension aside from my other pension, still plenty of recovery time, but AA and lack of actual disposable income meant I stopped contributed shortly after Liz lid waste to all. Change in AA and potential uplifts might allow me to contributed again in future.
 
danlightbulb said:
Ive been researching bonds quite a lot given I have a decision to make about whether to keep them in my portfolio or not.

Over the past 20 or so years, bonds have acted as a hedge to equity, they were inversely correlated so that if equities went down, bonds went up and vice versa. So its been seen as a way to diversify.

But, in the time before that, bonds and the stock market were more positively correlated so they went up and down together. This makes them not really a diversification to equities.

It seems that the negative correlation of bonds and stocks has been linked to the period of low interest rates, which were an anomaly over the past 100 years. If interest rates are returning to what is considered more historically normal, it may be that bonds return to their historical trend as well. Also the bond crash in 2022 has been linked to high inflation, which is now hopefully subsiding. I saw one article that said that during periods of high inflation, the best diversification would be commodities. They are no commodity funds I can invest in in my pension scheme though.

It seems that long term (100+ year) returns in stocks has been in the order of 10% and in bonds in the order of 6%. Actually that is not too bad, as an 80/20 mix would net you about 9% on average.

https://barbarafriedbergpersonalfinance.com/historical-stock-and-bond-returns/


So whilst stocks still outperform historically, it seems that if considering diversification it would still be sensible to hold bonds. As the past is no guarantee of future performance, who knows whether stocks will continue to outperform in future or whether the gap might close up. So on this basis I don't really understand why the recommendation is for 100% worldwide equities, because this would seem to be relying on the past performance of equities.
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Are you really still on this? Bonds are used as a short term lower risk hedge against more volatile stocks. AFAIR you are fairly young, if it was me I would stop screwing up my potential returns and invest 100% in equities for the next x decades.

IMO you're unlikely to lock on to a better strategy by yourself than equities. If you you really want to diversify and your mantra is past is no guarantee of future performance, maybe go 20% turnips?
 
EvilRob said:
Are you really still on this? Bonds are used as a short term lower risk hedge against more volatile stocks. AFAIR you are fairly young, if it was me I would stop screwing up my potential returns and invest 100% in equities for the next x decades.

IMO you're unlikely to lock on to a better strategy by yourself than equities. If you you really want to diversify and your mantra is past is no guarantee of future performance, maybe go 20% turnips?
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Don't you see the paradox though? If the past is no guarantee of future performance, then how do you know bonds won't start to outperform in the next 50 years rather than equity?

Your turnips analogy is not far off the mark. If one was truly trying to diversify fully, you would probably have 25% in equities, bonds, commodities and say cash or gold, or nowadays bitcoin...because there is no way to ever know which asset type will do well next.
 
danlightbulb said:
Don't you see the paradox though? If the past is no guarantee of future performance, then how do you know bonds won't start to outperform in the next 50 years rather than equity?

Your turnips analogy is not far off the mark. If one was truly trying to diversify fully, you would probably have 25% in equities, bonds, commodities and say cash or gold, or nowadays bitcoin...because there is no way to ever know which asset type will do well next.
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Imagine you own a company. You want to borrow money to grow your company. Are you borrowing that money with an expectation that you will grow your company more than it cost you to to borrow the money? Equities are you, the company owner. Bonds are the money you borrow.

Sometimes **** happens and it cost you more to borrow the money than your company grew. But on the whole, over long period periods of time across the global economy, companies grow faster and become more valuable than their costs to borrow. If that changes, I can't see bonds looking good either.

I have to admit I'm straying beyond my expertise here, but I'm making sense to myself!
 
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danlightbulb said:
So whilst stocks still outperform historically, it seems that if considering diversification it would still be sensible to hold bonds. As the past is no guarantee of future performance, who knows whether stocks will continue to outperform in future or whether the gap might close up. So on this basis I don't really understand why the recommendation is for 100% worldwide equities, because this would seem to be relying on the past performance of equities.
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There is more logic to holding equities when you are far away from retirement than "because they have historically outperformed bonds".

Equities are a riskier asset than bonds because there are no guarantees of dividend payments, they are not secured against any assets and they rank lower than debt on a winding up. As such, if a company issues equity the market will only buy it if there is an expectation that they will produce a return commensurate with that risk, and that expected return will always be higher than the expected return of a bond issued by same company. That risk/reward balance is then priced into the value of equities as they are traded in the market.

Whilst bonds could outperform equities when measured over short/medium periods of time due to movements in interest rates, inflation etc, the idea is that over the long term you will ride those market cycles and equities will produce the better return.
 
That all makes sense.

But it's still not guaranteed is it, even over say 50 years.

The point I'm making is only that when people say past performance is no guarantee of future performance, and then go for 100% equities, really they are themselves making an assumption of future performance based on what has happened in the last 100 years.

I don't think that would be a strict definition of diversification that's all. A 'pure' diversification would surely be completely independent of any asset class bias whatsoever.
 
danlightbulb said:
Don't you see the paradox though? If the past is no guarantee of future performance, then how do you know bonds won't start to outperform in the next 50 years rather than equity?

Your turnips analogy is not far off the mark. If one was truly trying to diversify fully, you would probably have 25% in equities, bonds, commodities and say cash or gold, or nowadays bitcoin...because there is no way to ever know which asset type will do well next.
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What you've described there is basically Harry Browne's Permanent Portfolio.


portfoliocharts.com

Permanent Portfolio – Portfolio Charts

Asset allocation, investing theory, and historical data for the Permanent Portfolio by Harry Browne
portfoliocharts.com portfoliocharts.com
 
Destination said:
late 40s, but that's just the pvt pension aside from my other pension, still plenty of recovery time, but AA and lack of actual disposable income meant I stopped contributed shortly after Liz lid waste to all. Change in AA and potential uplifts might allow me to contributed again in future.
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That's good you have time then. I'm just curious as well what is it invested in? Must be heavily into UK gilts and possibly stocks? Can't say the Truss event affected mine at all, although worth noting it did coincide with extreme pessimism in the markets but recovery since has been very strong.
 
200sols said:
That's good you have time then. I'm just curious as well what is it invested in? Must be heavily into UK gilts and possibly stocks? Can't say the Truss event affected mine at all, although worth noting it did coincide with extreme pessimism in the markets but recovery since has been very strong.
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What annoys me about a lot of employer pension schemes is how heavily weighted towards the UK the default fund tends to be.

Fund choices aren't always great either so in mine I just had to pick the closest thing to a global tracker that I could. Can't do partial transfer on my employer pension, at least right now.
 
Destination said:
You must have been signifcantly more fortunate than I
vfIQyMW.jpeg


Liz ****** things badly for me


-edited to remvoe personal info
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mine was pretty flat over that period
 
danlightbulb said:
That all makes sense.

But it's still not guaranteed is it, even over say 50 years.

The point I'm making is only that when people say past performance is no guarantee of future performance, and then go for 100% equities, really they are themselves making an assumption of future performance based on what has happened in the last 100 years.

I don't think that would be a strict definition of diversification that's all. A 'pure' diversification would surely be completely independent of any asset class bias whatsoever.
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Equities outperform based on the principal that a business can make money by borrowing money.

The reverse cannot occur, returns on debt are derived from equity returns

You should also keep in mind that, the current financial system is massively artificial, in that, deflation will never have any impact, while it can happen, and did during 2008/9, it was for a few months only, and never enough to impact anything.

UK Government Web Archive

This Page is [ARCHIVED CONTENT] and shows what the site page http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/1750---2003/composite-consumer-price-index-with-description-and-assessment-of-source-data.pdf looked like on 5 Jan 2016 at 16:07:09
www.ons.gov.uk www.ons.gov.uk

Have a look at how in the past deflation counteracted inflation, meaning for example, in two consecutive years, CPI was negative by 8 and 6%.

When you lend money in that, your returns are deflation + interest, pretty good, £ is worth more.

So the moral of the story here is, don't hold cash or cash equivalents.
 
slinxy said:
youtu.be

Will We Ever Be Able To Retire?

A report recently suggested that the state pension age will need to rise in order to keep the scheme going. Today lets look at what is going on. The brokers ...
youtu.be youtu.be
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That’s if it stays on its current trajectory. They need to end the triple lock. If they are going to push it up this high they should also break the 10 year link between the state and private pension. It’s not fair on those that have saved their own pension.
 
delta0 said:
That’s if it stays on its current trajectory. They need to end the triple lock. If they are going to push it up this high they should also break the 10 year link between the state and private pension. It’s not fair on those that have saved their own pension.
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Yeah, that link needs to be cut - it ruins peoples' planning and it's their own money after all.
 
CUrrent retirement age for me is 68... Depressing to think that it may increase to 71. This same think tanks and groups that suggest this are also saying it will affect people born in the 70's i.e. people in their mid 40's to 50's!!
 
What is the Cheapest SIPP to own?
InvestEngine is asking for 0.15% and no further fees and even undercut Vanguard on their own fund if using an ETF such as VWRP.
Too good to be true and last?
They do not allow a transfer in at the moment so will probably stick to Vanguard for now but with so many players wanting a set and forget account on an index tracker is the goal.
 
delta0 said:
That’s if it stays on its current trajectory. They need to end the triple lock. If they are going to push it up this high they should also break the 10 year link between the state and private pension. It’s not fair on those that have saved their own pension.
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The issue is, like all Ponzi schemes.. it only works if the rewards at the end are good enough, for people to want to put their money into it. By increasing the retirement age.. and there’s talks about increasing the age where you can access a private pension to 57, it makes the rewards less, likewise removing the triple lock.

I don’t have any solution to fixing this, heck some government may just sell off the state pension scheme to a private company like they done with student loans.

People are living longer but should we make everyone work longer? A lot of people and I plan to do this myself; just down tools when they are nearing their retirement. Some work places give staff who are on a defined contribution pensions a payrise or a promotion just before retirement so that they more from their pensions.

The other question that I would like to raise is that is it fair for people who never worked or have a patchy work history to get a state pension? Considering some have hardly put any money towards the pot and expect to be able to take out the same; if not more as they will be getting other benefits like housing and council tax during their retirement.
 
slinxy said:
The issue is, like all Ponzi schemes.. it only works if the rewards at the end are good enough, for people to want to put their money into it. By increasing the retirement age.. and there’s talks about increasing the age where you can access a private pension to 57, it makes the rewards less, likewise removing the triple lock.

I don’t have any solution to fixing this, heck some government may just sell off the state pension scheme to a private company like they done with student loans.

People are living longer but should we make everyone work longer? A lot of people and I plan to do this myself; just down tools when they are nearing their retirement. Some work places give staff who are on a defined contribution pensions a payrise or a promotion just before retirement so that they more from their pensions.

The other question that I would like to raise is that is it fair for people who never worked or have a patchy work history to get a state pension? Considering some have hardly put any money towards the pot and expect to be able to take out the same; if not more as they will be getting other benefits like housing and council tax during their retirement.
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Your talking about DB schemes not DC schemes.
Giving someone a payrise who is on DC only affects CONTRIBUTIONS
 
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