Expected average pension performance ?

SuperBowserWorld

About to look at my pension performance...

so, I've an idea if it's good, bad or otherwise ...

what's the average return I should expect from a default investment strategy PRSA/ Company Pension over the past 10, 20 years ?

Jim2007

There is no such thing. It will depend very much on the asset classes and instruments selected, the fees applied, the timing of the application of the funds (to be clear this is not trying to time the market) and tactical and strategic approach selected by the pension fund manager. So the only thing you can really measure is whether the fund is tracking the benchmark for such a basket of assets. Now doing performance and attribution analysis is a complex task, requiring a lot of market information, so if the pension fund does not provide it, there is little chance you'll be able to do it yourself.

That said, the issue for most people is getting an answer to the question, will my pot be big enough to generate the kind of income I need in retirement? Now I don't know how or if Irish pension fund advisors tackle that question as I spent most of my working life in Swiss private banking. It is very hard to predict such a value, so we just used a quick rule of thumb:

((Current Salary Annual Salary * 80%) - Annual State Pension) / Conversion rate = Target Pension Pot

Now most people can live very well on substantially less than this figure, but by aiming high we hope post people will end up with a reasonable outcome. If for instance you found that your projected pension fund was going to be substantially (say 30% - 40%) below that figure, then you'd probably need to react before it is too late.

SuperBowserWorld

https://www.boards.ie/discussion/comment/121572219#Comment_121572219

Thanks for that excellent answer.

I'm running some pension calculators on my pension provider web site. But these always seem disconnected from reality for me.

Alkers

The problem with Irish pension I find, is that they may advertise an annual fee and / or a contribution charge, which is fair enough.

Then your pension funds are invested in various funds and mechanisms which often charge your pension funds a percentage also, which you have no ability to track.

Even indexed funds available through pension funds that I've seen have high charges.

Jim2007

https://www.boards.ie/discussion/comment/121572537#Comment_121572537

People are a bit too hung up on the fees though. The original research that lead to the whole ETF index funds industry, never suggested investing in indexes! It was suggested as the benchmark mark for figuring out if the fees were worth paying. Basically the fee you pay for a tracker is the maximum you should pay on a fund with a zero tracking error. Beyond that fees may indeed be worth paying. The consensus is that an equity fund should return around 5% - 6% over the long haul, so if a fund is delivering you 11% and charging say 3% it might well be worth it. You’d really have to do a lot more research.