Is this a normal return for a workplace pension? +£73.09 (0.89%) in almost five years - honestly what can I do to improve this?

[chosen808]

Total contributions: £8,184.13
Last regular contribution: £210.00
Value of investments: £8,238.76
Investment loss or gain since 07 Dec 2018: +£73.09 (0.89%)

This is a workplace pension set up by one of the big German discounters with Legal and General.

2 funds invested in:

1. L&G PMC Multi-Asset G25 (£6,517.07 invested, +1.22% since 07 Dec 2018)
2. L&G PMC World (Ex-UK) Equity Index Fund G25 (£1,721.69 invested, -0.31% since 14 Dec 2021)

+£73.09 in almost five years seems very low. The pension planner tool on L&G page shows a final estimated pension pot of just over £200k by 65 years old. But that assumes a 3.7% return AFTER already taking out inflation! The actually yearly return has been nowhere close to that! (.89% over almost five years).

Have I been auto enrolled into the wrong funds? What can I do to improve these returns because these numbers are scary. I would have earned more in a low interest savings account! Gross salary £35k. Age 30. Location Bristol area. Thanks everyone in advance! Any further details I will be happy to provide.

 

[roger5599]

@chosen808 We need a wiki page or some kind of automod for this.

Your pension (unless it's a defined benefit scheme) is invested in a combination of equity funds and bonds funds.

Funds go down as well as up and they do so without consistency.

In the last 5 years we've had COVID and Ukraine and a million other things that have impacted markets.

Everyone is down. No one expected this. It would never have been prudent to have your pension in savings vs invested.

Only thing to consider is to review whether your fund allocation in your pension is at a risk tolerance you're happy (chances are it's currently too risk averse(!)). But really you should have done this on day 1 of having a pension.

There's nothing else you could have done really to make this any better with any certainty.

 

[chosen808]

@roger5599 Thanks for that response. Are there any funds that you know of that I could switch to for potentially better returns. I have no issue with taking equivalent risk if it makes sense for the longer haul. Current fund risk is 4/7 and 5/7 respectively according to the L&G fund factsheet. And unfortunately I did not know about funds and pensions on day 1. I was just told I was automatically enrolled and there was nothing I needed to do. I guess stupid me for accepting that.

 

[roger5599]

@chosen808 The main thing to look for is probably equity vs bond allocation. I would say at your age there is no reason to have bond allocation in a pension. Incidentally it's likely any bond allocation that has brought down your returns the most, but this is a very atypical thing.

 

[chosen808]

@roger5599 Noted. I will have a look at some pure equity funds to start contributing to if available with L&G.

 

[jaelhope]

@chosen808 Stock market in general is utter trash right now. Almost none of my pensions or funds have recovered above their pre-covid value.

 

[drew873]

@jaelhope I wouldn’t say the market is that bad at the moment. A global index fund is significantly higher than January 2020 denominated in GBP.

 

[chosen808]

@jaelhope Appreciate the response. I'm not the only one with a terrible pension makes me feel slightly more reassured. Work till I die I expect! Thanks.

 

[lifeaintagame]

@chosen808 Changed job 2.5 years ago and I'm completely flat since then. And that takes into account I was buying long after covid was a big issue. I must have missed some of the drop.

The stock market and pensions are a long game. You need to be ready for drops, not just flat periods.

 

[chosen808]

@lifeaintagame Thanks!

 

[caliber81]

@chosen808 Think of it this way. You've been buying units of your pension fund (if you do it that way) at depressed value. When the markets go up again, your pension will rocket up.

It's a discount

 

[chosen808]

@caliber81 Lightbulb moment! Brilliant. Thank you for the advice.

 

[caliber81]

@chosen808 No worries. Remember as well the tax benefits of pension payments AND your employer gives you essentially free money. And just don't look at it very often.

 

[glorfindel8]

@chosen808 If this was 35 years of performance you'd be concerned. Its a small blip so dont fret, you have a long way to go yet.

 

[chosen808]

@glorfindel8 Thanks for the response. Slightly more reassured. Do you think the funds that I was auto enrolled into are fine for longer term?

 

[glorfindel8]

@chosen808 I think for the average person the default funds are typically fine. Personally I go default with my workplace pension and use a Vangaurd target retirement fund for my SIPP. My workplace pension makes it ridiculously hard to see what its investing in and how but personally without a lot of research I wouldnt know what to move it to anyway. And if I did theres no guarantee I'd get a better return. Unless you decide to become an investing pro, stick to the default and trust in the long term results. Good luck

 

[chosen808]

@glorfindel8 Thank you for the reply!

 

[resjudicata]

@chosen808 If you won't retire for a while, it's a good thing that the funds you are investing in are cheap right now.

 

[chosen808]

@resjudicata Do you recommend I stay invested in the same funds or do you not know enough about them? Do you recommend adding more funds for diversity? Or shall I just leave it how it is?

 

[heremiah]

@chosen808 Leave it how it is. There's no advantage to chopping and changing. The last five years' performance doesn't predict the next five.