Question
How do I compare the performance of my Pension Fund relative to other funds to check I've got my money in the right place?
Answer
I find the past performance data on the Trustnet website very helpful for this kind of comparison.
Firstly, make a list of the fund(s) you hold within your pension – you can find these on a recent statement.
Next find out which pension fund sectors these funds are in, as it makes sense to compare the performance of your funds with others in the same sector to ensure a more relevant comparison. You can do this by first running a search on Trustnet for your pension fund manager. This will show the available funds, click on the funds you own and make a note of the sector as displayed in the information summary page for each fund.
Now go back to the main search page and enter the sector of your first fund. You can review performance over various periods. Returns over 1, 3 and 5 years are useful to give a general feel versus the competition. However, also look at the ‘discrete’ year by year returns as these highlight how consistent the fund has been, e.g. 5 year returns could be the same for two funds, but one might have delivered positive returns in each of the years while the other had one exceptional year followed by four years of losses – which would you prefer to own?
Aside from trying to ensure you own funds that will perform well versus peers, a major factor that will influence returns is asset allocation, i.e. the assets and areas in which your money is invested. For example, owning the best UK stockmarket funds will be of little consolation if the UK market dives and other markets soar. It makes sense to have a good spread of investment across global stockmarkets, fixed interest, property and commodities – the proportions of which should vary depending on how much risk you’re comfortable taking.
If you own a with-profits fund in your pension then performance is far more difficult to compare because with-profits is such an opaque type of investment – you need to factor in potential terminal bonuses and market value adjustments, both of which can be specific to your personal holding. The best source of general with-profits performance I’ve found is Money Management Magazine which publishes periodic reviews of the with-profits market.
How do I compare the performance of my Pension Fund relative to other funds to check I've got my money in the right place?
Answer
I find the past performance data on the Trustnet website very helpful for this kind of comparison.
Firstly, make a list of the fund(s) you hold within your pension – you can find these on a recent statement.
Next find out which pension fund sectors these funds are in, as it makes sense to compare the performance of your funds with others in the same sector to ensure a more relevant comparison. You can do this by first running a search on Trustnet for your pension fund manager. This will show the available funds, click on the funds you own and make a note of the sector as displayed in the information summary page for each fund.
Now go back to the main search page and enter the sector of your first fund. You can review performance over various periods. Returns over 1, 3 and 5 years are useful to give a general feel versus the competition. However, also look at the ‘discrete’ year by year returns as these highlight how consistent the fund has been, e.g. 5 year returns could be the same for two funds, but one might have delivered positive returns in each of the years while the other had one exceptional year followed by four years of losses – which would you prefer to own?
Aside from trying to ensure you own funds that will perform well versus peers, a major factor that will influence returns is asset allocation, i.e. the assets and areas in which your money is invested. For example, owning the best UK stockmarket funds will be of little consolation if the UK market dives and other markets soar. It makes sense to have a good spread of investment across global stockmarkets, fixed interest, property and commodities – the proportions of which should vary depending on how much risk you’re comfortable taking.
If you own a with-profits fund in your pension then performance is far more difficult to compare because with-profits is such an opaque type of investment – you need to factor in potential terminal bonuses and market value adjustments, both of which can be specific to your personal holding. The best source of general with-profits performance I’ve found is Money Management Magazine which publishes periodic reviews of the with-profits market.
Read this Q and A at http://www.candidmoney.com/questions/question168.aspx
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