How is your pension plan doing?

We produce a full review report for our clients each year (for many twice each year) and this a great opportunity for them to see how their pension fund is performing.

Just recently one of my clients looked at her pension fund and expressed the view that performance was “a bit lack lustre”.

I understand the importance of performance to our clients so a response like this always grabs my attention.

The first thing that I noted was that the value of her plan was significantly more than she had invested. I pointed this out.

“Yes”, she said, “but think how much more it would have been had I invested in UK shares rather than the mixed asset class model that you have recommended”.

My immediate response was, actually I think you are much better off with what we have recommended.

After further analysis, had she invested in a fund tracking the FTSE 100 index her pension plan today would be worth 8.5% less than what she had paid in.

In fact a mixed asset class portfolio with funds invested in cash, fixed interest securities, commercial property and shares (both in the UK and internationally) have made her pension fund +11.2% greater in value.

It shows the value of well constructed and diverse portfolio in my view.

There will of course be times when a 100% equity portfolio outperforms the mixed asset class portfolio but for most of our clients that would simply not be suitable.

Photo credit: Flickr/treehouse1977