Reduction in Pension valuations

[Paul O Mahoney]

Hi all, just spending a few hours analysing our pensions, and have noticed an approximate reduction in unit prices and then total valuation of 5.75% from the start of the year to end of May 2022.

Obviously the war in Ukraine, the economic woes most economies are experiencing probably the main drivers of this and with inflation forecasted to remain relatively high, growth globally will probably be slower than thought at the start of the year.

I was wondering if the many experts on this forum has noticed similar reductions in value of pension funds and what if any the consensus is in the market now.

I understand that as long term investments pensions ebb and flow over the duration of investing, but as we rapidly approach 60 we are trying to get a handle on when it would be financially viable to retire.

Any thoughts would be appreciated.

 

[Paul O Mahoney]

For some reason this post posted twice apologies perhaps mods could delete one.

 

[jpd]

The consensus in the market is mixed - some think it will go down more, others think it will go up

In truth, no one knows

 

[Paul O Mahoney]

The consensus in the market is mixed - some think it will go down more, others think it will go up

In truth, no one knows

I get that and we won't speculate but my question is really about what has happened and what is happening now and are fund managers adjusting for this.

I maybe asking for the impossible, but I would think there is " chatter ".

 

[T McGibney]

I get that and we won't speculate but my question is really about what has happened and what is happening now and are fund managers adjusting for this.

I maybe asking for the impossible, but I would think there is " chatter ".

Fund managers always adjust for events, and there is always chatter but in general trying to time markets in the short term is s a mug's game.

 

[jpd]

The value of a pension fund is the value of the underlying investments

In the case of listed investments, then the value is the market value and will go up and down as the market does
In the case of unlisted investments, then the fund manager has to take a view on the value of the investment - his view is obviously adjusted as the markets go up and down. The valuation has to pass audit committees, auditors and regulators

Other than that, I am not sure what exactly you are looking for

 

[Paul O Mahoney]

The value of a pension fund is the value of the underlying investments

In the case of listed investments, then the value is the market value and will go up and down as the market does
In the case of unlisted investments, then the fund manager has to take a view on the value of the investment - his view is obviously adjusted as the markets go up and down. The valuation has to pass audit committees, auditors and regulators

Other than that, I am not sure what exactly you are looking for

Yeah, but I was always of the opinion that the job of Fund Managers was actively managing funds and adjusting for negative movements in the value of those funds and reduce volatility?

Perhaps I'm not understanding the role of a Fund Manager.

 

[Conan]

Yeah, but I was always of the opinion that the job of Fund Managers was actively managing funds and adjusting for negative movements in the value of those funds and reduce volatility?

Perhaps I'm not understanding the role of a Fund Manager.

Yes, in theory. But even if Fund Managers thought that markets were likely to come under pressure, none of them would sell everything and move to cash. Changes in the asset mix will tend to be at the margin, reducing certain Equity holdings and perhaps moving to other potentially less volatile asset classes. But ultimately, Fund Managers don’t want to be significantly out of sync with what their competitors are doing (no one wants to be bottom of the league table).
But in addition, they have to reflect what their clients invested in. So if a group of clients invested in say a Global Equity fund, then the manager is obliged to follow those instructions. They cannot just move largely to Cash, even if they have a negative short term view of Global Equities.

 

[callybags]

It's all relative. 5 months is a very short time in pension value terms.

For example, my pension ( no contributions made) over the last few years looks as follows:

Last 5 months -5%
Last 12 months +26%
Last 24 months +19%
Last 5 years + 27%

Overall, I'm more than happy with the performance.

 

[Paul O Mahoney]

It's all relative. 5 months is a very short time in pension value terms.

For example, my pension ( no contributions made) over the last few years looks as follows:

Last 5 months -5%
Last 12 months +26%
Last 24 months +19%
Last 5 years + 27%

Overall, I'm more than happy with the performance.

Oh I know that and really wasn't saying that decisions for the long term should be based on the last months, but I was asking if others like yourself have noticed the same drop,, yes, and if it was thought that the factors I listed were going to change.

 

[1eyeonthefuture]

A reduction of 5 or 6% is not bad.
I'm largely exposed to tech and equities and my pension is down over 10%.
Im in it for the long haul so only time I see this sort of reduction as a problem is if you were retiring but this is why as you approach retirement general concensus is that you move into less risky funds and cash.

 

[Paul O Mahoney]

A reduction of 5 or 6% is not bad.
I'm largely exposed to tech and equities and my pension is down over 10%.
Im in it for the long haul so only time I see this sort of reduction as a problem is if you were retiring but this is why as you approach retirement general concensus is that you move into less risky funds and cash.

Agreed and her pension is already " lifestyling" so 50% of her contributions since last August are now going into 2 more less risky funds, although she has always been in moderate risk funds.

While I'm no expert but I like to forecast, roughly(excel spreadsheet)her funds annually using a very basic 4% compounding, as that is the max she'll be able to take from her ARF and it's a low ball growth figure, actual returns are higher than that on average

I just don't know what the effects of inflation, the other factors would have on the 4% ,perhaps it's a moon shot trying to predict it.

 

[TRS30]

Assuming you can invest in an ARF at retirement you could theoretically be invested in the markets for another 30+ years.

I’m sure I’ve seen it posted here before that retirement shouldn’t mean a rush to cash/bonds, especially in a high inflation environment.

Re fund managers, my (albeit limited) experience is that they are like sheep and following the pack (or should that be flock!).

 

[Brendan Burgess]

I’m sure I’ve seen it posted here before that retirement shouldn’t mean a rush to cash/bonds, especially in a high inflation environment.

Correct. "Lifestyling" makes no sense at all, but to some people it has the ring of some carefully constructed plan.

Brendan

 

[noproblem]

Oh I know that and really wasn't saying that decisions for the long term should be based on the last months, but I was asking if others like yourself have noticed the same drop,, yes, and if it was thought that the factors I listed were going to change.

Yes Paul, my funds would be overall down this amount. Some by lesser margins, others by higher, but overall your %'age is near enough for me. As I'm in the nearly 70 group I should be worried but am up enough over the past 7 years to stick with it for now and for the next few years at least.

 

[SPC100]

The folks who should worry most are the people who just retired, are DC, need to draw down pension, and were cutting it tight on size of their fund. Sequence of return risk is real.

You are now getting more for your money when you invest. This guarantees higher future return vs your Dec investment. Time to increase your contribution.

 

[Paul O Mahoney]

Correct. "Lifestyling" makes no sense at all, but to some people it has the ring of some carefully constructed plan.

Brendan

That's what its called in the pension plan, and that's why I used it. The pension contributions are now split over 3 funds one of which is cash.......and automatically started when my wife reach 57

I don't have another name for it.

 

[Paul O Mahoney]

Assuming you can invest in an ARF at retirement you could theoretically be invested in the markets for another 30+ years.

I’m sure I’ve seen it posted here before that retirement shouldn’t mean a rush to cash/bonds, especially in a high inflation environment.

Re fund managers, my (albeit limited) experience is that they are like sheep and following the pack (or should that be flock!).

Thanks.

 

[PGF2016]

Oh I know that and really wasn't saying that decisions for the long term should be based on the last months, but I was asking if others like yourself have noticed the same drop,, yes, and if it was thought that the factors I listed were going to change.

Haven't checked but no reason to think all pensions haven't taken a hit in the last few months.

Are the factors going to change? Definitely. And something else will come up. There's always something happening. It's just noise.

 

[Paul O Mahoney]

Haven't checked but no reason to think all pensions haven't taken a hit in the last few months.

Are the factors going to change? Definitely. And something else will come up. There's always something happening. It's just noise.

Is it though? Dow is down 10.3% Ftse up 2.5% and Euro 50 down about 12% since Jan.

Most funds I've looked at are down to some degree, my understanding wouldn't be the best to explain why, and I'm only trying to understand the various aspects of this decline as on retirement we will hold Arfs and they too will be subject to market forces.