BE WARY, WARY AND QUITE CONTRARY
I see that sections of the media (and usually it seems those with no money themselves) are still banging on about "rip off" charges on Private Pensions, and as a consequence Labour MPs have joined in presumably to win over the votes of oldies with savings.
Actually this is an old outdated story. True there are old pension plans from a long gone era when transparency of charges was practically non-existent, but modern personal pension plans (erroneously often described by the media as SIPPs) are no more expensive in total charges than Collective investments like Unit Trusts, OEICs etc.
But even these investments, including ISAs .... just tax efficient Collectives ... are apparently too dear and being avoided by investors who are being brainwashed by the media to believing that cheap is cheerful (and better). By the way an earlier generation of journalists said the same about Equitable Life .... they're nice and cheap bla bla bla, ........ hoodwinked masses of professionals, then it went tits up because it was really a big Ponzi scheme.
2014 had two big Investment stories .... 1) Neil Woodford giving up at Invesco Perpetual's two excellent Income funds; and 2) A massive swing away from Active Managed Funds …. too dear .... to Passive Trackers .... nice an' cheap, and a belief stirred up by the media that you can't beat Trackers anyway. Mmm.
1) When it was announced in October 2013 Neil Woodford would be leaving Invesco Perpetual in April 2014, immediately there were stories appearing about getting out and into something better. That meant lots of investors were panicked into some other investment, and presumably some were moved on to Woodford much later in 2014 when his own firm was formed. Charges? Mmm. Rumour is Artemis Income took in massive amounts.
So let's look back from today to April 2014 .... Invesco Perpetual High Income …. up after charges by 16.68%; Artemis Income up 11.12%! Incidentally the FTSE Total Return is up only 8.9%, and the well supported "cheap" Aviva UK Tracker is only up 7.98% .... mind you .... miles better than Virgin's UK Tracker up a mere 5.75% after cheap charges.
2) First half of 2014 belonged also to flight away from "expensive" Active Managed Funds to "cheap" Index Trackers, because "hardly any Active Funds can beat a Tracker" mantra spun regularly ... despite the evidence recently exposed by the Daily Telegraph that over the last 10 years, half the UK active funds beat the UK FTSE total return.
For example Legal & General - the daddies of Trackers, in the first six months of last year took in an amount to its Trackers equal to one third of its existing total funds at the turn of the year .... such was the volume of funds shifted by private investors and pension funds. And the results? Look above. The best Tracker after their cheap costs managed about 8%, less than half that of Invesco Perpetual's High Income fund .... and about a quarter of the returns of "expensive charged" funds like Fundsmith (up 28% after costs) and Neptune Global Alpha (up 29.5 %) …. to name just two.
Sadly this constant bleating about "rip off charges" instead of balanced reporting on the big picture leads more and more investors rushing to perceived bargains and safety and reduces their retirement income significantly. And who's held accountable?
(Sources: Lipper 8 April 2015 and Daily Telegraph 6 April 2015)
- Past performance is not a reliable indicator of future performance.
- The value of an investment and the income from it could go down as well as up. You may not get back what you invest