Pension Advice

Macker

Hi ,due to some changes that will be made to our company pension I was comparing my pension with a work mate ,we are both in the same company pension for the last 23 years, I transfered some money from a previous job ,his pension contributions are 105,560 euro and his pension pot is 150,260 euro so its profit is 43%, my contributions are 128,580 euro and my pension pot is 156,260 euro so a growth of 22% ,any reason why my growth would be so low.

Thanks⁹

Boardnashea

Are you both the same age? There may have been a different default allocation to safer/riskier funds. Or you may have selected different risk profiles.

When did you transfer funds in from other pension?

Were you both contributing at the same rate?

And are you both looking at the same figures on your pension update/summary? He could be looking at projected pension pot at retirement date and you looking at current pension pot.

Arthurdaly

Most providers will offer a range of funds from Equities, Property, Cash, Bonds and also funds with a mixture of depending on investment profile. Returns will be significantly different across these funds.

Also providers may offer an automated hands off approach to which fund you are invested with depending on length of time until retirement or a hands on approach where you personally select the fund or mixture of funds.

It's likely your friend is investing the contributions into a different fund. Do you know which fund or the investment profile of your fund?

Macker

My fund was "Aviva MA Esg3 SerB/Aviva Investors"

Aviva MA Esg4 SerB/Aviva Investors"

His is Esg 4 and Esg 5

The J Stands for Jay

There's your reason. You can only expect identical results if you pay the same amounts, at the same time, to the same funds, through the same product structure, while looking a values from the same date.

Macker

It was a managed fund ,I didn't ask for one fund or the other ,my contributions were more than my work mates

Macker

20% seems a huge differance ,I am a few years older ,I put my fund into cash 6 months ago because it was l9sing so much money

Atlantic Dawn

When your pension fund was transferred it's likely the unit price for the funds was high at this stage meaning you got less units for your investment than your colleague did over time.

For example if your pension was transferred pre Covid when prices were at a relative peak they would get much less units than if they invested when the funds dropped off the charts in 2020. Putting €5k in December 2019 would have probably bought a third less units than €5k in April 2020 would have bought. Along the years with various peaks and troughs this happens.

Not financial advise as I don't know your exact circumstances but when the funds were dropping 6 months ago you were getting more units for your money, that's where the big gains are when the market turns.

Henry Ford III

Ask your pension admin.

Jim2007

https://www.boards.ie/discussion/comment/121017804#Comment_121017804

Nobody here is going to be able to explain this difference to you. Even people like myself with expertise in this area are not going to be able to explain it to you, because you simple don't have access to all the information we'd need to do the analysis. Your pension fund would have the information required to do such calculations, but I very much doubt they'd be willing to provide it to you and it involves someone else's data and that would require them to break the law in order to do so.

There are many reasons why one persons investments out perform anthers, including:

• Timing differences
• Portfolio construction
• Valuations rules for joining the fund
• Valuation rules for buying additional benefits
• and so on

The only valid comparison you can make is against the benchmark, assuming this information is available for the investment choices you made. But again this requires some expertise in calculating a compost benchmark.

As @Henry Ford III says: Contact you pension administration and see why information and explanations they can provide. Hopefully they will be able to at least provide you with performance compared to the benchmark, but don't expect they will be willing to discuss someone else's pension benefits.

And based on my experience yes it is very possible for 20% or even more gap to open up.

Macker

Thanks all for taking the time to answer ,I didn't make any investment choices except putting it into cash 6 months ago because it was dropping like a stone

Jim2007

https://www.boards.ie/discussion/comment/121019857#Comment_121019857

Going into cash was a decision and at a glance the S&P moved about 12% - 13% during that period, so depending on the asset allocation, it is very possible that a large slice of the gap relates to your decision do move to cash.

There are plenty of these diagrams and discussions around:

Moving to cash is almost always the wrong answer.

coylemj

https://www.boards.ie/discussion/comment/121019857#Comment_121019857

Moving from a managed fund to cash after stocks drop in price is a recipe for disaster. By switching to cash, you have effectively locked in your lossses.

Your plan is probably to go back into the old fund when you think the markets are about to recover but by the time you make that decision, it's likely that the recovery will have already happened and you will be too late.

If you are more than 10 years from retirement, you should have all of your money in a managed fund with a risk profile in the area of 4 or 5, just like your colleague. Leave the investment decisions to the professionals and stop trying to second guess market movements.

Macker

I'm 4 years from retirement and as I said it was losing money ,14k over the last couple of years ,my broker said for peace of mind it might be worth it ,and it's creeping up now

coylemj

Did that broker ever mention that, beginning 10 years before you reach retirement age, the general advice is to move 10% of your money each year from managed to more cautiously managed funds?

Henry Ford III

https://www.boards.ie/discussion/comment/121024245#Comment_121024245

There's no such thing as "general advice" so be careful suggesting it.

There are lifestyle strategies but they are far from universal.

Arthurdaly

Attempting to time the market is impossible and you are now left in a position where its very tricky to actually move your funds back into a more aggressive fund than cash.

As others have alluded to the general strategy is to move monies to more cautious funds / cash as your retirement draws closer. With a hands off approach the allocation of your funds should not really have been 100% in high risk funds with 4 years to retirement so shouldn't have been in the position where you move everything to cash in a single transaction. I'd check with pension advisor.

But maybe given where you are now and with only 4 years from retirement cash is the best option for peace of mind and protect your position. On the other hand the war could end in 6 months and markets enter an almighty bull run until your retirement date, nobody knows.

Macker

thanks for all the advice folks , apprecite it , I had no contact with the broker in the twenty odd years I have the pension ,It was my call to move it to cash for peace of mind , another quick question if I may , my wife has a small pension started late in life , would it be worth pumping some cash in for a few years to avail of a tax free lump sum on retirment , I think my tax free lump sum is maxed out and the pension doesnt buy me much she earns 35,500 before tax

Jim2007

https://www.boards.ie/discussion/comment/121028957#Comment_121028957

At this point I'd suggest you seek proper financial advice rather than head down this road on your own.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121576657#Comment_121576657

You said your AVC fund was surrendered, so no-one is getting 8nvestment returns from your fund

Kinsailor

@The J Stands for Jay : Thank you for your helpful feedback : I am sorry if my explanation was inadequate - Just to clarify further: - the fund was never released or transferred to me (and the fund manager only recently told me that it was 'surrendered' 6 months ago on the occasion of my retirement). Hence my question about the funds status during the 6 months.