and every year we review the funds of all customers whose
pension and other funds are invested through us.
Much is written and said about investment
fund performance, there are always conflicting views on where
and how the best returns are made.
I was once at a meeting where an investment house introduced
its various fund managers to discuss their portfolios and
give their views on what would be possibly sound investments. One
manager came on and made an excellent case for investing in
Russia, giving examples of what they believed were Russian companies
and stocks that offered good returns for relatively low risk.
No sooner had the applause died down for
the speaker, when another well respected investment manager
took the stage and within seconds had said “Well you
wouldn’t want to be investing in Russia, would you ?
!! They wern't joking - I remain confused to this day.
Many of the customers who use our income
drawdown service come to us because they want a way of taking
their 25% tax free lump sum without the need to buy an annuity
or take some other form of retirement income. We always
explain that taking the lump sum is the easy bit, it is managing
the 75% that remains invested that is the hard part.
Each February we conduct our annual fund
review, where we tell customers how their pension fund has
performed over the previous year and give them a range of
options on what they can do. As a non-advised service we use
a range of passive funds to allow customers access to a fund
that matches the personal level of risk they are prepared
to take with regard to their own investment.
The customer can also choose their own funds.
With the passive fund approach, somebody
who is very cautious and worried about investment can sleep
peacefully at night knowing that they are never going to be
in high-risk funds, while those customers who are prepared
to speculate can equally be certain that their money is being
managed in line with their wishes.
So how did we do in 2013 ?
Overall we are very pleased with the performance - however
it is what the customer thinks that is the important bit,
and no doubt they will tell us over the weeks ahead.
The important thing to say is that there are no big losses
for any customer to report. While some customers may have
seen a small reduction, many have had their fund more or less
hold its value. These customers have all been in cautious
/ balanced funds where their primary concern has been not
to lose what they have, rather than risk that safety for potentially
higher returns. To that end we feel the funds have done their
There have been some excellent returns for
customers during 2013. It has not been untypical for adventurous
customers to see a return of around 7.5% for the year. Not
bad (we think) given that the country is in the middle of
a severe austerity programme and has had the Bank of England
base rate locked at 0.5% for several years.
Here are just a few of our outstanding performers
for 2013 :
A customer in a balanced managed fund, which
was valued at just under £353,000 in March 2012 managed
to take £22,915 out of the fund during the year and
still see their fund grown to over £357,000 by January
A client with a standard Managed Fund and
nothing else, achieved 7.66% growth during the year increasing
their fund value from £75,847 to £81,661.
But our favourite is the customer who in
2005 invested £55,000 in an Income Bond. They have taken
a regular income since then directly out of the bond. In total
they have taken £22,616. On the date of our 2014 fund
review (17th January 2014) the bond was still worth £51,494.
Of course none of the results above can be guaranteed and
the value of your fund can go down as well as up. It also
doesn’t mean that aggressive funds are better performers
than more cautious funds. An aggressive fund looks to achieve
higher than average returns than a cautious fund, however
there is significantly greater risk that you could take big
losses if the investments don’t perform as anticipated.
This year we have been lucky that the aggressive funds have
delivered a return.
Customers in more cautious funds shouldn’t really feel
disappointed that they didn’t achieve the same growth.
Their funds never set out to achieve it in the first place.
Their aim was to achieve growth but not at the expense of
risking the initial value of the fund. Generally all of our
funds have performed much as expected – let’s
hope it is the same story next year !!
We feel this demonstrates that we have a sound non-advised
fund management process that matches clients to the correct
level of exposure and that our funds perform in line with
what would be expected from the rest of the market.
If you would like to know how we can help you manage your
existing pension fund call us on 020 33 55 4827. We can also
provide quotes for annuities, income drawdown or even get
you guaranteed growth on your pension fund if protecting your
capital is your main consideration.