Pension management

[bottle]

Possibly a commonly considered query so bear with me, I am signed up with my employer’s pension scheme that is managed / administered by one of the big pension firms who offer approx 20 different funds that can be invested in. Do other people actively track performance of funds etc and swap between them based on performance or do they blindly stick to a long term strategy?

The fund fact sheets seem to show monthly performance up to March 2022, and then show a YTD performance number which makes it difficult to actively track performance. Is there a way to get more regular updates?

Taking the last 6 months into account, where the funds my pension is invested in took a decent hit and continue to do so, should I consider an index linked fund for a few months until things settle a bit? It would be less risky but it doesnt make much sense sticking with funds that have been performing poorly due to market instability. Thanks.

 

[ClubMan]

Is there a way to get more regular updates?

Your annual statements?

Taking the last 6 months into account, where the funds my pension is invested in took a decent hit and continue to do so, should I consider an index linked fund for a few months until things settle a bit?

Timing the market is a mug's game.
Just make sure that it's invested in an appropriate fund and leave it alone.
Unless you're close to retirement you should definitely at least consider investing in an all equities fund.

You seem to have a mistaken idea of what an index linked fund is as you seem to imply that you think it's less volatile than other types of fund. It's not necessarily. It depends on what it's invested in. Maybe you actually meant a cash/bond fund? Don't switch to such a fund trying to time the market.

 

[Steven Barrett]

Possibly a commonly considered query so bear with me, I am signed up with my employer’s pension scheme that is managed / administered by one of the big pension firms who offer approx 20 different funds that can be invested in. Do other people actively track performance of funds etc and swap between them based on performance or do they blindly stick to a long term strategy?

That's like back a horse after he won the race assuming he's going to win the next one. You won't get any rewards for the growth that has already been achieved. You will probably lose a lot of money as well as drive yourself crazy trying to second guess the market.

"Lethargy bordering on sloth remains the cornerstone of our investment style" - Warren Buffett

Listen to the world's greatest investor. Pick a strategy that invests in quality assets and let it do its thing. The more equities, the higher the return but it is increased risk (two falls of -50% in the 2000's! ). If that's too spicy for you, pick a managed fund and just leave it.


Steven
www.bluewaterfp.ie

 

[NoRegretsCoyote]

Possibly a commonly considered query so bear with me, I am signed up with my employer’s pension scheme that is managed / administered by one of the big pension firms who offer approx 20 different funds that can be invested in

Fees are the biggest drag on investment returns over the long run.

You shouldn't try to pick the mix, just try and stay all in equities until very close to retirement.

 

[so-crates]

Have you online access to your pension? If so, you can certainly track the value of those funds on a weekday by weekday basis if you really want to. I actually do track mine (though not on a day by day basis!) and have done so now for years, but I don't do it in order to attempt to actively manage my investments. The reason I started it was because I was suspicious that the returns touted seemed better than the actual returns. What I found was exactly what @NoRegretsCoyote points out, fees are a drag...

 

[Conan]

If you want to drive yourself mad, check the prices daily or even weekly (like checking equity prices daily or weekly). The prices go up and they go down. The sensible thing is to decide on a long-term investment strategy (taking into account your years to retirement). If you have a good number of years to run to retirement- 10 years plus- then simply go for an Equity strategy or a Managed Fund which will typically have a c70% equity content. Then just let the Fund Manager do their job.
Yes, do check on the charges (Fund Managers aren’t charities) and review performance say once a year to see how they are performing against similar funds. But remember if you are a member of an Employer scheme you realistically only can choose the funds available from that structure.

 

[ClubMan]

But remember if you are a member of an Employer scheme you realistically only can choose the funds available from that structure.

But if the occupational pension scheme charges are high then consider contributing the minimum amount that you need to get the maximum employer contribution and then maybe look for something like a low charges AVC PRSA, separate from the occupational scheme, for additional voluntary contributions up to your age related pension tax relief limit. (On the other hand, if you're buying or thinking of buying a home maybe prioritise that first).

 

[moneymakeover]

Decide on a strategy
Equities(North American)/property/bonds/cash/commodities/Gold etc
Also which fund new contributions go into (I choose equities)

For example there is a rule of thumb
60% equities and 40% bonds
But bond holders lost out in recent years
Consider interest rates going up/down when investing in bonds

Your strategy might change over time and you can revisit

 

[ClubMan]

For example there is a rule of thumb
60% equities and 40% bonds

That rule of thumb never made much sense to me, and often seems to be parroted as received wisdom by many. Unless you are close to retirement, an all/mostly equities approach has a lot to recommend it over the medium/long term. And, even if you ARE near retirement, longevity and rolling a large chunk of the pension into an ongoing ARF investment may be a good reason to stay quite concentrated in equities even then. At the very least, a young person investing in their pension should try to avoid unnecessarily putting the brakes on long term gains with too cautious an investment strategy/asset mix (and high charges).

 

[NoRegretsCoyote]

And, even if you ARE near retirement, longevity and rolling a large chunk of the pension into an ongoing ARF investment may be a good reason to stay quite concentrated in equities even then.

100%. A 65 year old man has a life expectancy of 19 and a woman a life expectancy of 21. That's a long time.

There is bomb-out risk with an all-equity strategy (several good AAM threads on this) but over two decades it's hard to see how equities would underperform bonds/property.

I thought people recommending a heavy bond mix in portfolio c. 2017-2021 were bananas when interest rates were as low as they had ever been. There was basically zero scope for capital gain in bonds. Don't forget equities have theoretically unlimited upside. Bonds don't!

 

[Roro999]

There is bomb-out risk with an all-equity strategy (several good AAM threads on this) but over two decades it's hard to see how equities would underperform bonds/property.

Any links to the several good threads on bomb out risks of an all equity strategy.

 

[AJAM]

When comparing pension fund performance, comparing over the last 3, 6 even 12 months is pointless.
You should be comparing over 3, 5 and 10 year periods, to get a proper sense of how the funds perform over the long term.

 

[bottle]

Thanks All, lots of sound advice, consistent theme which answers my question.

 

[jpd]

And, as always, past performance is no guide to future performance - so why even bother other than looking at fees and charges

 

[ClubMan]

And, as always, past performance is no guide to future performance - so why even bother other than looking at fees and charges

And, as per some recent pension threads here, fund selection. In general, somebody with a while to go to retirement - and, arguably, somebody in this health and likely longevity about to retire and roll a significant chunk into an ARF - should probably be in a high/fully equities fund. And possibly an index tracker to eliminate often pointless additional active management charges.