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

[robj20]

They'll 'lifestyle' you into more and more bonds as you get older and you'll miss out on a lot of growth IMO.

Only 39 so a way to go yet. My understanding is you potentially want the safer stuff later on unless you know what you're doing, which I don't.

 

[ddoubleep]

I had a look at mine today, still disappointing how little is in there and how much it is projected to be when I retire! Had a sniff around the funds (it’s managed by legal and general) there seem to be about 28 different funds it could be in but the whole lot has been in a new fund called ‘growth’ for the last which is only a year old so hard to compare over the longer term with the other funds, it is equity based and mostly US which seems sensible although I am tempted to diversify it and split between two similarly performing pots to hopefully a get a better long term average! The web portal seems intended to make it deliberately difficult to see how your money has been performing!

I'm sure L&G do their own Developed World tracker or Dev World exc. UK for something like 0.10 or 0.12% when I checked recently for a family member who was also in a retirement fund and moved it out the default to global equity. There was also an Islamic World tracker that's done very well and ESG world. Take a look to see if you can find these.

 

[Uther]

Only 39 so a way to go yet. My understanding is you potentially want the safer stuff later on unless you know what you're doing, which I don't.

That seems to be the perceived wisdom yes, although with a target retirement fund I think you'll already have a proportion of bonds in the portfolio even though you are several decades from retirement.
It comes down to peoples attitude to risk really, I'm still heavily in stocks even though I've retired, and plan to continue on that path for a few years yet, which I'm perfectly comfortable with.

 

[robj20]

That seems to be the perceived wisdom yes, although with a target retirement fund I think you'll already have a proportion of bonds in the portfolio even though you are several decades from retirement.
It comes down to peoples attitude to risk really, I'm still heavily in stocks even though I've retired, and plan to continue on that path for a few years yet, which I'm perfectly comfortable with.

Yep I think it's 20/80 split at the minute.

 

[Azza]

I had a look at mine today, still disappointing how little is in there and how much it is projected to be when I retire! Had a sniff around the funds (it’s managed by legal and general) there seem to be about 28 different funds it could be in but the whole lot has been in a new fund called ‘growth’ for the last which is only a year old so hard to compare over the longer term with the other funds, it is equity based and mostly US which seems sensible although I am tempted to diversify it and split between two similarly performing pots to hopefully a get a better long term average! The web portal seems intended to make it deliberately difficult to see how your money has been performing!

I found L&G website pretty easy to use.

Go into workspace pension
Investments
Browse available funds
Filter by asset type, charge, provider etc.
View fund factsheet.

Or you could use https://fundcentres.lgim.com/en/uk/...#Product=WorkSave-Pension-Plan-(generation-3) to view funds. Just change the product type if it's not Work Save Gen3 you're employer is in.

My funds have averaged over 10 per cent per annum over the last 10 years. I track their performance every month and I only invest in global equity trackers. The default lifestyle fund is basically a tax on stupid people.

Why are you checking on it monthly?

I'm sure L&G do their own Developed World tracker or Dev World exc. UK for something like 0.10 or 0.12% when I checked recently for a family member who was also in a retirement fund and moved it out the default to global equity. There was also an Islamic World tracker that's done very well and ESG world. Take a look to see if you can find these.

Yes - L&G PMC Global Developed Equity Index is 0.10%. World ex-UK is 0.12%.

 

[decto]

I'm curious if folk still opt for an annuity versus a drawdown, which seems to be a better method for a) ensuring maximum investment returns (assuming no catastrophic banking crashes), b) allowing money to be pulled as required and potentially better management of tax arrangements and c) ensuring all pension investments are accessible via beneficiary and retained within the estate after death.

It's not a straight forward decision.
Annuity will tend to pay a higher rate than a drawdown as the risk is averaged. You have to assume you live for 30-40 years and limit the drawdown while the insurance company can plan an average of 25 years across a big pool.
You also have some certainty, if stocks drop 30% one year and take a while to recover, a real possibility over 30+ years you could burn the pot a lot faster.
Returns are averaged which is fine when saving but a risk when you need to draw and pay the bills.

Back calculating a 4% drawdown fails over a high percentage of history wheras currently you can get 4.2% with 3% annual increase and 50% partner at 60 or 4.9% same terms at 65.

I'm not there for a while yet, but would consider a split if in good health. Convert part to an annuity, sufficient for the basics then leave the rest to grow and call off as needed.

 

[slinxy]

My funds have averaged over 10 per cent per annum over the last 10 years. I track their performance every month and I only invest in global equity trackers. The default lifestyle fund is basically a tax on stupid people.

Lifestyle is not a fund, it’s an investment plan/strategy…. You can have many different funds within a lifestyle plan.. my default one invests in funds that aren’t available in the open market.

They'll 'lifestyle' you into more and more bonds as you get older and you'll miss out on a lot of growth IMO.

Simple solution is just to extend the retirement date, so that they move you into safer investments at a later date and you have more time in the more risky investments.. fine if you have a means of supporting yourself for that period, like other pension pots and ISAs in case the market takes a tumble.

 

[danlightbulb]

Simple solution is just to extend the retirement date, so that they move you into safer investments at a later date and you have more time in the more risky investments.. fine if you have a means of supporting yourself for that period, like other pension pots and ISAs in case the market takes a tumble.

Default funds are probably still UK heavy though, extending the retirement date doesn't solve this issue.

 

[Jack_green]

Why don't they rename this **** better?

Pension before tax
Pension after tax

Not this stupid "net pay" jargon.

Because they like to complicate, the more complicated it is the the less you understand and more they can charge you.

If you want to reduce your tax bill you could set up a none profit charity. Donate to it and then use it to pay towards education of your children. You need to know a charity can't be based for one person but you can work around this

 

[a1ex2001]

I'm sure L&G do their own Developed World tracker or Dev World exc. UK for something like 0.10 or 0.12% when I checked recently for a family member who was also in a retirement fund and moved it out the default to global equity. There was also an Islamic World tracker that's done very well and ESG world. Take a look to see if you can find these.

I noticed the Islamic fun seemed to have performed exceptionally over the last 5 years, it has slightly higher fees but if it maintained its performance it would more than make up for that. The generic growth fund I’m in is all equities and mostly US and the performance over the last year since they set it up is pretty good compared to the rest of the funds. Think I need to split my pot a bit just to balance my risk v’s growth

 

[200sols]

The name 'islamic world' is a bit of a misnomer, basically still full of US tech etc just minus gambling and alcohol.

 

[ddoubleep]

I noticed the Islamic fun seemed to have performed exceptionally over the last 5 years, it has slightly higher fees but if it maintained its performance it would more than make up for that. The generic growth fund I’m in is all equities and mostly US and the performance over the last year since they set it up is pretty good compared to the rest of the funds. Think I need to split my pot a bit just to balance my risk v’s growth

As this was not my own funds it was difficult to say go for the Islamic one based solely on past performance as this had a lot to do with the magnificent 7 making a higher % over the Developed World Tracker and therefore would have had those major gains and will continue to do so as long as the Mag 7 go up and up in all these index funds based on their % but yes it just minus gambling and alcohol and more towards the fund ethos.

 

[ddoubleep]

Mag 7 also make it sound like 493 of the S&P 500 companies have not grown at all! Imagine if they all grew. VUAG and Co would go to the moon!

 

[booyaka]

It's not a straight forward decision.
Annuity will tend to pay a higher rate than a drawdown as the risk is averaged. You have to assume you live for 30-40 years and limit the drawdown while the insurance company can plan an average of 25 years across a big pool.
You also have some certainty, if stocks drop 30% one year and take a while to recover, a real possibility over 30+ years you could burn the pot a lot faster.
Returns are averaged which is fine when saving but a risk when you need to draw and pay the bills.

Back calculating a 4% drawdown fails over a high percentage of history wheras currently you can get 4.2% with 3% annual increase and 50% partner at 60 or 4.9% same terms at 65.

I'm not there for a while yet, but would consider a split if in good health. Convert part to an annuity, sufficient for the basics then leave the rest to grow and call off as needed.

Annuities - whilst better value now than say 2/3 years ago due to higher interest rates, are still rarely used in any "decent" sized fund.

The one big thing that people look for is the ability to pass on the fund to spouse/children etc. That "offsets" the risk element a fair bit for a lot of people in their mind.

Also flexibility for how and when you take income/tax free cash etc is way more beneficial for most people over annuity.

Not sure where your getting your "back calculation" numbers from - real world examples of 20 years plus don't show any issues with drawdown.

3% increase would be pointless over the last few years - failing to keep pace with cost of living/inflation - where as you can adjust the income as you see fit with drawdown.

Not saying annuities are dead - but rarely used unless client is very risk averse, or has a need for fixed guaranteed income without the consideration to pass on the fund/flexibility etc - which is usually more beneficial to clients over fixed income.

 

[robj20]

Would something like the LifeStrategy® 100% Equity Fund be better than the target retirement fund then.

I certainly don't know enough to pick my own funds individually.

 

[Uther]

Would something like the LifeStrategy® 100% Equity Fund be better than the target retirement fund then.

I certainly don't know enough to pick my own funds individually.

I think a global tracker would be better, set and forget. Lifestrategy funds are heavily biased to their home market.
Something like this perhaps:

Vanguard Asset Management | Personal Investing in the UK | Vanguard UK Investor

www.vanguardinvestor.co.uk

 

[slinxy]

Would something like the LifeStrategy® 100% Equity Fund be better than the target retirement fund then.

I certainly don't know enough to pick my own funds individually.

Personally I have LifeStrategy 60 and 80, for the simple reason in case the stock market goes belly up and I will still have some bonds.

a LifeStrategy fund doesn't move your funds into bonds as time draw nearer to your set date. so it's up to you to move it into bonds or keep it in stocks for longer.

 

[platinum87]

Personally I have LifeStrategy 60 and 80, for the simple reason in case the stock market goes belly up and I will still have some bonds.

The stock market goes belly up and, you will still have some bonds, and then what?


Edit :

Name	YTD Return (%)	1 Year Annualised (%)	3 Years Annualised (%)	5 Years Annualised (%)	10 Years Annualised (%)
Check-box for table item	Vanguard LifeStrategy 100% Equity Fund A Acc	5.71	19.09	9.00	9.87	10.32
Check-box for table item	Vanguard LifeStrategy 80% Equity Fund A Acc	4.36	15.34	6.11	7.59	8.50
Check-box for table item	Vanguard LifeStrategy 60% Equity Fund A Acc	2.99	11.65	3.31	5.31	6.68
Check-box for table item	Vanguard LifeStrategy 40% Equity Fund A Acc	1.49	7.88	0.57	3.01	4.81
Check-box for table item	Vanguard LifeStrategy 20% Equity Fund A Gross Acc	0.05	4.69	−1.90	0.90	3.04

 

[slinxy]

The stock market goes belly up and, you will still have some bonds, and then what?

The bonds will still give me a fixed return over the period till the stock market recovers.

 

[platinum87]

The bonds will still give me a fixed return over the period till the stock market recovers.

That's what everyone says, all the way back to the donkey who fist coined the term risk adjusted return when volatility was confounded conflated with risk.