Pension 6.5% CAGR - 5 years - Good ?
Discussion
Apologises for the basic question, I don't normally give my pension much thought other that make sure I contribute when possible.
The SJP post got me thinking, what are my actual pension growth rates and fees (several from different employees over the years).
The good news is the highest is .75% but most are 0.5% (these are dormant pensions with no new transactions going in).
However the weighted average annualised return over the past five years is 6.5% . At first glance, that doesn’t seem too bad, but when I compare it to the figures being quoted on other posts (mid to high teens), I’m starting to wonder if I need to reassess.
Some context;
No plans to draw pension for over 15 years, no need for tax free lump sum.
All pension ex employees, with the likes of Aviva, Aegon and Fidelity.
Total value today incluing a DB at 20X, is £620k)
The SJP post got me thinking, what are my actual pension growth rates and fees (several from different employees over the years).
The good news is the highest is .75% but most are 0.5% (these are dormant pensions with no new transactions going in).
However the weighted average annualised return over the past five years is 6.5% . At first glance, that doesn’t seem too bad, but when I compare it to the figures being quoted on other posts (mid to high teens), I’m starting to wonder if I need to reassess.
Some context;
No plans to draw pension for over 15 years, no need for tax free lump sum.
All pension ex employees, with the likes of Aviva, Aegon and Fidelity.
Total value today incluing a DB at 20X, is £620k)
Wilmslowboy said:
Apologises for the basic question, I don't normally give my pension much thought other that make sure I contribute when possible.
The SJP post got me thinking, what are my actual pension growth rates and fees (several from different employees over the years).
The good news is the highest is .75% but most are 0.5% (these are dormant pensions with no new transactions going in).
However the weighted average annualised return over the past five years is 6.5% . At first glance, that doesn t seem too bad, but when I compare it to the figures being quoted on other posts (mid to high teens), I m starting to wonder if I need to reassess.
Some context;
No plans to draw pension for over 15 years, no need for tax free lump sum.
All pension ex employees, with the likes of Aviva, Aegon and Fidelity.
Total value today incluing a DB at 20X, is £620k)
There are many views on what is good or bad.Number of years to retirement is a factor also.The SJP post got me thinking, what are my actual pension growth rates and fees (several from different employees over the years).
The good news is the highest is .75% but most are 0.5% (these are dormant pensions with no new transactions going in).
However the weighted average annualised return over the past five years is 6.5% . At first glance, that doesn t seem too bad, but when I compare it to the figures being quoted on other posts (mid to high teens), I m starting to wonder if I need to reassess.
Some context;
No plans to draw pension for over 15 years, no need for tax free lump sum.
All pension ex employees, with the likes of Aviva, Aegon and Fidelity.
Total value today incluing a DB at 20X, is £620k)
However take a look at something like the MSCI world index it will give you a feel for what an equity only return could be. You will find that 6.5% does not look great compared to that, but high teens you hear being quoted is not sustainable. One year yes possible even probable, but not consistently. The MSCI world index has since inception seen an annualised return of around 8-9%. This would seem to be a good target.
You'd need to look at the make up of the funds and your age.
Most pensions will put people in a "life styling" type fund by default where the make-up of the fund will change as you get older.
If you look at something like LifeStrategy 60 the last 5 year return is just about bang on 6% similar for HSBC Global Strategy Balanced.
People saying "I've made this" or "I've made that" means nothing without knowing the specifics of what they're invested in and why.
Most pensions will put people in a "life styling" type fund by default where the make-up of the fund will change as you get older.
If you look at something like LifeStrategy 60 the last 5 year return is just about bang on 6% similar for HSBC Global Strategy Balanced.
People saying "I've made this" or "I've made that" means nothing without knowing the specifics of what they're invested in and why.
Good practice to keep on top of your investments, but don't be taken by just looking at one side of the equation.
Many have posted "better" returns, but they invariably are taking on more risk (than they fully understand or appreciate) than you. Personal finance is just that, personal /unique to you. It's a bit like the Rabbit and Tortoise race, some take a steady pace, some like it a bit more racey, and maybe some like a mix of both. All that's matters is ensuring your investment performance is meeting YOUR financial targets/plan/requirements.
Many have posted "better" returns, but they invariably are taking on more risk (than they fully understand or appreciate) than you. Personal finance is just that, personal /unique to you. It's a bit like the Rabbit and Tortoise race, some take a steady pace, some like it a bit more racey, and maybe some like a mix of both. All that's matters is ensuring your investment performance is meeting YOUR financial targets/plan/requirements.
Vanguard Global all cap - 44% over the last 4.25 years which is when I began to take control of where my money was. Appreciate this is my ‘personal’ rate of return so will have missed and hit some dips and troughs but smooths out eventually.
6% wouldn’t be impressing me too much, tbh.
6% wouldn’t be impressing me too much, tbh.
ChrisNic said:
Just by way of comparison my employers default 60% equities fund has averaged 11.3% over 5 years with a 100% equities option managing 16.47.
And the start of that 5 year period is a severe dip in 2020. And the end is an all time high.Not representative of actual.long term growth.
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hstewie said:
hstewie said: You'd need to look at the make up of the funds and your age.
Most pensions will put people in a "life styling" type fund by default where the make-up of the fund will change as you get older.
If you look at something like LifeStrategy 60 the last 5 year return is just about bang on 6% similar for HSBC Global Strategy Balanced.
People saying "I've made this" or "I've made that" means nothing without knowing the specifics of what they're invested in and why.
.....And which cherry picked time period and chosen fund to boast aboutMost pensions will put people in a "life styling" type fund by default where the make-up of the fund will change as you get older.
If you look at something like LifeStrategy 60 the last 5 year return is just about bang on 6% similar for HSBC Global Strategy Balanced.
People saying "I've made this" or "I've made that" means nothing without knowing the specifics of what they're invested in and why.
From what I can see, the funds that have been doing really well and making more than your 6.5% are just massively loaded up with US tech firms. If you’ve picked something less risky it’ll be a bit more balanced.
Just picking one of my better performing funds shows +62% over five years. But they’re always the same faces in the funds. They could quite easily do
-62% in the next month.
Just picking one of my better performing funds shows +62% over five years. But they’re always the same faces in the funds. They could quite easily do
-62% in the next month.
Wilmslowboy said:
the weighted average annualised return over the past five years is 6.5% .
"Returns" don't tell you very much on their own. They have to be looked at in the context of "risk".Also watch out for human nature. People big-up their successes and tend to keep quiet about the wobbles. For what it's worth my bond investments have been, by my standards, pretty disastrous. Annual yield currently +5.3% but that reduces to 4% if the fall in bond values is taken into account (and it's only 1% ahead of inflation). Inevitably that's a drag on total portfolio return but I could easily just tell you about the equity funds that are going well.
However, unless your approach is deliberately low risk that 6.5% deserves further investigation. If you can get to a long term 8 or 9% net after all costs and without too much risk the compounding effect will be much stronger than at 6.5%. On the other hand 6.5% is at least ahead of inflation, bank deposits and so on. The bottom line is risk vs reward.
"Since 1957, S&P500 has delivered an average annual return of over 10% - a figure that has created substantial gains for long-term investors. However, that number tells only part of the story. Behind these average gains lies a history of bull and bear markets, devastating crashes and remarkable recoveries."
Crumpet said:
From what I can see, the funds that have been doing really well and making more than your 6.5% are just massively loaded up with US tech firms. If you ve picked something less risky it ll be a bit more balanced.
Just picking one of my better performing funds shows +62% over five years. But they re always the same faces in the funds. They could quite easily do
-62% in the next month.
This is where performance figures can be misleading. You have to understand risk and return. Not to criticise Crumpet, but here is the performance of JGGI this year. It lost 20% over a couple of months, and remember that means to get back to the same figure you started with you now need a 25% increase in price.Just picking one of my better performing funds shows +62% over five years. But they re always the same faces in the funds. They could quite easily do
-62% in the next month.
A lot of people would not like to see that happen to their pension pot, and could lead to making bad decisions going forward.
Claret m said:
This is where performance figures can be misleading. You have to understand risk and return. Not to criticise Crumpet, but here is the performance of JGGI this year. It lost 20% over a couple of months, and remember that means to get back to the same figure you started with you now need a 25% increase in price.
A lot of people would not like to see that happen to their pension pot, and could lead to making bad decisions going forward.
Absolutely! That’s my point. The fluctuations can be quite wild and it’s a high risk fund. I bought that fund about 18-24 months ago (I think!) and it shows +15% in that time; that’s my own personal gain. I bought another, JP Morgan America Equity, at the same time and that’s done me 29%. At one point it showed something like 45% until Trump did his thing with the markets. A lot of people would not like to see that happen to their pension pot, and could lead to making bad decisions going forward.
I’ll be totally honest, I use about 20% of my pension contributions as a total gamble on the highest risk things I can find. I wouldn’t recommend that to anyone, but it’s sort of fun.
The rest of my more sensible investments in the SIPP look to do about 7-8% YoY. I don’t think the OP is doing too bad, really.
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