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

[tangey]

easy to transfer to another provider that does provide all the options.

It's extremely rare for ALL options not to be offered. Any of the bigger providers will offer all options to the beneficiaries

NEST simply doesn't have the capacity/offerings as they are very basic provider of pensions to fulfil a need for employers to tick a box

You can only transfer out of Nest when you stop contributing. No partial transfers allowed.

I note that my IG SIPP also only allows lump sum on death. I need to be with IG as I need to hold oz shares in a SIPP and they are the only ones I know in the UK that can do so.

 

[EvilRob]

You can only transfer out of Nest when you stop contributing. No partial transfers allowed.

So why does that matter? no one will still be contributing when they're 75.

 

[tangey]

So why does that matter? no one will still be contributing when they're 75.

This is nothing to do with the 75 age limit. I'm 61, still contributing, if I drop dead, my nominee, who is still working, will receive the payout from nest as a lump sum. I suspect most would like the option to select between lump sum/annuity/nominee pension, depending on their particular tax situation at the time. What do you do with a substantial lump sum...you can't stick it in an ISA due to annual limits, you can't stick it into a pension due to annual contribution limits. In my situation my nominee would much prefer to continue with a nominee pension, continue to have the growth tax free, and take an income from it when most appropriate.

@booyaka

It's extremely rare for ALL options not to be offered. Any of the bigger providers will offer all options to the beneficiaries

NEST simply doesn't have the capacity/offerings as they are very basic provider of pensions to fulfil a need for employers to tick a box

understand what you are saying, but NEST is the largest workplace pension provider, with around 12M accounts and £30B under their control. That's 12M people whose pot will have to paid out as a lump sum if they die. And whilst still contributing, no option to transfer to a pension provider that does provide the other options.

 

[booyaka]

@booyaka

understand what you are saying, but NEST is the largest workplace pension provider, with around 12M accounts and £30B under their control. That's 12M people whose pot will have to paid out as a lump sum if they die. And whilst still contributing, no option to transfer to a pension provider that does provide the other options.

I'm well aware of their size and stature and this is why it still amazes me that they do not allow a transfer of benefit on death for the beneficiaries to another dependents pension/annuity etc. It's shockingly poor and should have more negative press about it that it gets.

 

[danlightbulb]

understand what you are saying, but NEST is the largest workplace pension provider, with around 12M accounts and £30B under their control. That's 12M people whose pot will have to paid out as a lump sum if they die. And whilst still contributing, no option to transfer to a pension provider that does provide the other options.

You should take it up with your employer. Only pressure from employers can make them change their behaviour (without government intervention).

 

[EvilRob]

This is nothing to do with the 75 age limit. I'm 61, still contributing, if I drop dead, my nominee, who is still working, will receive the payout from nest as a lump sum. I suspect most would like the option to select between lump sum/annuity/nominee pension, depending on their particular tax situation at the time. What do you do with a substantial lump sum...you can't stick it in an ISA due to annual limits, you can't stick it into a pension due to annual contribution limits. In my situation my nominee would much prefer to continue with a nominee pension, continue to have the growth tax free, and take an income from it when most appropriate.

@booyaka

I didn't realise a beneficiary inheriting a pension could keep invested and not incur any tax on the growth in addition to not paying any on the pot value. That's pretty great.

 

[tangey]

Anyone parked some money in the Sterling Short-Term Money Market Fund (VASTMGA) whilst figuring out what to do ?
I've recently sold the bulk of my global ex UK fund as I'm close to retirement and am a bit worried about a big hit at exactly the wrong time for me.

I note that currently vanguard pays 2.35% interest on cash in a SIPP. I'd like to think the the £ money market fund would do a little better.

Anyone any experience with it ?

 

[OldKitMan]

Anyone parked some money in the Sterling Short-Term Money Market Fund (VASTMGA) whilst figuring out what to do ?
I've recently sold the bulk of my global ex UK fund as I'm close to retirement and am a bit worried about a big hit at exactly the wrong time for me.

I note that currently vanguard pays 2.35% interest on cash in a SIPP. I'd like to think the the £ money market fund would do a little better.

Anyone any experience with it ?

I've got a small amount in 'Sterling Short-Term Money Market Fund – Accumulation' - on Vanguard it's showing a return of 3.14% at the moment.

 

[tangey]

I've got a small amount in 'Sterling Short-Term Money Market Fund – Accumulation' - on Vanguard it's showing a return of 3.14% at the moment.

is that over a 12 month period ?

 

[200sols]

Anyone parked some money in the Sterling Short-Term Money Market Fund (VASTMGA) whilst figuring out what to do ?
I've recently sold the bulk of my global ex UK fund as I'm close to retirement and am a bit worried about a big hit at exactly the wrong time for me.

I note that currently vanguard pays 2.35% interest on cash in a SIPP. I'd like to think the the £ money market fund would do a little better.

Anyone any experience with it ?

Vanguard MMF should be yielding close to the base rate. Expect about 4.75% a year at the moment.

Over the last year its done 5.15% which in line with what you'd expect.

 

[OldKitMan]

is that over a 12 month period ?

no - only started putting some money into that since april (when it became available on the vanguard platform - before april only income not accumulation was available - now both are).

 

[booyaka]

Anyone parked some money in the Sterling Short-Term Money Market Fund (VASTMGA) whilst figuring out what to do ?
I've recently sold the bulk of my global ex UK fund as I'm close to retirement and am a bit worried about a big hit at exactly the wrong time for me.

I note that currently vanguard pays 2.35% interest on cash in a SIPP. I'd like to think the the £ money market fund would do a little better.

Anyone any experience with it ?

Are you likely to buy an annuity? Or continue with some kind of drawdown income/pension?

 

[slinxy]

Personally, I'm planning to use my DB pensions and some of my DC pension to buy an annuity. Along with the state pension, it's a guarantee income for a set period of my life.

The rest of it will be used as draw down.

I've heard that it's essential to have a fix income when immigrating to some countries and it's makes it easiler to get the required visa in other countries.
that would be nice, to have a fixed income, money coming in from leasing/renting out the house and to rent somewhere aboard where it's nice a warm for my eldarly bones...

 

[tangey]

Are you likely to buy an annuity? Or continue with some kind of drawdown income/pension?

dunno yet to be honest, but I've read a few things that tell me that it is wise to derisk for the first few years of retirement (really says to derisk before retirement, but that ship is nearly sailed for me), as an early shock to the portfolio has a big effect going forward. I'm veering towards draw down at the moment. I've got 6 years to bridge to get the state pension (assuming it's still around), So the flexibility of drawdown would appeal to me.

 

[tangey]

Anyone got a pointer to a video that explainst the following.

I've read that a single gilt or bond, you know exactly what you get at the end, there is no chance of losing money. You get the interest (coupon), and at the end you get the bond value back. Its guaranteed..although not at all exciting, returns.

How come a bond fund can go away down ? If it's just a collection of bonds, each of which following the rules above, where is the uncertainty that can result in them losing money ?

Does the variance only happen for corporate bonds (which I undertand the company might fail or not have the ability to pay back the required amount) ?

 

[booyaka]

Anyone got a pointer to a video that explainst the following.

I've read that a single gilt or bond, you know exactly what you get at the end, there is no chance of losing money. You get the interest (coupon), and at the end you get the bond value back. Its guaranteed..although not at all exciting, returns.

How come a bond fund can go away down ? If it's just a collection of bonds, each of which following the rules above, where is the uncertainty that can result in them losing money ?

Does the variance only happen for corporate bonds (which I undertand the company might fail or not have the ability to pay back the required amount) ?

Gilts - The UK government has never defaulted on bond payments, but it's possible they wouldn't be able to repay the bond if the UK went bankrupt. However, if interest rates rise, bond prices fall and investors may sell their bonds to buy new "higher" rates....

Also remember that inflation has a huge effect on gilts... If it's paying 4% and inflation is 3%, your "real" rate of return is only 1%....

Also if you need to sell to realise cash, you could loose money selling before maturity of the gilt.

As a part of a balanced portfolio - gilts/bonds are useful...... but unless you are very low risk, gilts and bonds aren't particularly exciting for returns in the "real" world. Also factor in drawing income from your pension and alike, then loads of bonds/gilts probably isn't a wise choice.

Similarly with Corporate Bonds - issued by companies to raise money, default is generally higher (but still very low in the grand scheme of things with A+++ rated stuff), potentially better returns offered but same thing applies. Inflation, selling early etc etc

 

[slinxy]

Anyone got a pointer to a video that explainst the following.

I've read that a single gilt or bond, you know exactly what you get at the end, there is no chance of losing money. You get the interest (coupon), and at the end you get the bond value back. Its guaranteed..although not at all exciting, returns.

How come a bond fund can go away down ? If it's just a collection of bonds, each of which following the rules above, where is the uncertainty that can result in them losing money ?

Does the variance only happen for corporate bonds (which I undertand the company might fail or not have the ability to pay back the required amount) ?

bonds are basically IOUs from a government or company.

For example
Say they borrow £1000 from you, they will promise to pay you back in a certain way. The two methods are:
110 pounds for the next 10 months = 10% or
100 pounds for 10 months then a 100 extra at the end, they are taxed differently...

You can don't "lose" money on holding the bond for the whole life cycle and you will know what you get in return as long as that government/company don't file for bankruptcy, or some other form of debt restructuring.

Say you brought a bond that gives 5% rate of return, then the interest rates changes so that it's lower and the new bonds are only offfering 4%... in theory you can sell your bond to someone else for 4.5% (as an example) and pocket the money now to spend/re-invest rather than have to wait till the whole life cycle ends.

but if the interest rates goes up to 6% for new bonds, you may have to sell your bonds at much lower rate to cash in quickly.

the other thing is inflation, say you brought a bond with the rate of return for 3% and banks are offering 5%, then you're basically lossing 2% per year.

The rate of return and lenght matters, some companies will offer a high rate of return if they don't have the "credit" status to borrow money at lower rates.
Government bonds have lower rates as it's basically the government and they will get you your money.

There are times were a company like vodafone, who have brought back some of their bonds at higher rate to get rid of the debt.

Then there's the whole FX trading, where you by another countries bonds... say if the pound is stong vs the dollar at 1 pound vs 1.30 dollar, you buy 1300 dollars of bonds..you can wait till the dollar is stronger and sell the bond at some loss but make the profit on the exchange rate.

 

[200sols]

How come a bond fund can go away down ? If it's just a collection of bonds, each of which following the rules above, where is the uncertainty that can result in them losing money ?

Its not just bond funds that go down in price, individual bonds/gilts do as well. Its true they always redeem at par so you can lock in a yield for the duration of the term but the price of the bond does fluctuate a lot, more so the longer the duration.

Its really simple though, bond yields and bond prices have an inverse correlation. As yields rise prices fall. Bond funds have a mandate, they dont always hold to maturity.

 

[tangey]

thanks guys, kinda got it now. Bond funds will have their own criteria, and also because investors will be selling their holdings at any particular time, then that means the fund has to sell bonds to pay the investors, and the bond might not have a great price anymore because interest rates go up.

But buying individual bonds and holding to maturity gives guaranteed return (assuming the bond's issuer doesn't have problems). Depending on the coupon locked in, if inflation increases over the life of the bond, the real value of the return might be negative.