A 57-year-old investor in Legal & General’s Multi-Asset Fund should expect to lose 2.1 per cent of their fund by the time they are 65, figures from the provider’s modeller show.
L&G’s modeller, which is provided by eValue, shows that someone aged 57 expecting to draw their pension at 65 who puts £100,000 in can expect to get £97,900 when they retire if they go for the MAC option 1 fund.
L&G is not the only provider to use eValue – its website says around 90 per cent of providers use at least some of its services.
The eValue modeller gives investors a picture of what their fund might be, based on stochastic models, in real terms. Negative real returns on bonds mean over shorter periods returns are currently negative in real terms for the fund.
Advisers say there is nothing inaccurate about the modeller, but caution that using such modelling techniques can risk turning off investors.
LCP partner Andy Cheseldine says: “The problem is that we have been in a period of negative real bond returns for some time now – this data feeds into the modeling and gives a negative picture. If you are near to retirement, then a diversified growth fund is the right place to be. If you are very near retirement and want to take cash, then you should stick it in cash, or bonds if you want an annuity.
“It is an honest view, and it is certainly not unique to L&G – lots of other providers use a similar approach. But the industry needs to think hard about how it is used, and reinforce the point that with tax relief an employer contribution it is always better to stay in the scheme.”
EValue founder and strategy director Bruce Moss says: “If you factor in charges and low returns over a short period then these negative numbers can come out. Our aim is to be honest and to show it as it is.”