There are two situations when we might be particularly well advised to take a look at our financial planning.
The first is in times of upsurge and change, particularly with regard to legislation and rules affecting our long-term future.
The second is when, caught up with the stresses and pressures of everyday life, we have ‘taken our eye off the ball’ and not requested a spot-check on our savings and investments for some time.
For many of us, the last 12 months could qualify in both categories.
Pensions legislation certainly took centre stage over the course of 2015, and continues to do so this year, with new rules that have baffled many, and further confusion from an array of proposals (which may of course come to nothing) for workplace pensions, private pensions, and the state pension system.
In fact, it would be a full-time job trying to keep up with it all – unless, of course, you read this column every week, in which case you are one of the nation’s leading experts.
However, now a different area of retirement planning is having its moment in the limelight.
I’m referring to money you may have in investment funds – and before that little voice inside your head tells you ‘I don’t have money in investment funds’, well, if you are saving into a workplace or private pension, or a stocks and shares Isa, then I’m here to tell you: you almost certainly do.
This is because your pension scheme invests your savings ‘onward’ into investment funds and the stock market, and in a defined contribution scheme, it is the performance of those investments that will largely define the growth in your pension savings each year, and influence the size of your pension later on.
The good news is that you may be able to ‘tune up’ your savings by switching from funds that are going through a bad patch, and into funds that are currently firing on all cylinders. Your financial adviser can do this for you.
This is why, when the London asset manager Tilney Bestinvest publishes its twice-yearly round-up of the best and worst performers among the UK’s investment funds, industry experts pay attention. The latest such round-up was published last month.
Tilney points out funds that have underperformed their target or benchmark for three years in a row, and have also underperformed by 10 per cent or more over this three-year period.
This affects you, because if your savings are invested in one or more of these under-performers, you are missing out, because you could be achieving much better growth by switching into better-performing funds.
Simply put, your money could be working much harder for you.
In January’s report, we find that the last six months have seen a 46 per cent increase in under-performing funds to 54, up from 37 in mid-2015.
The report identifies certain types of fund that have been to the fore in failing to meet their targets.
This time it’s those which invest in North America that are going through a rough patch, with the 10 funds identified representing 18 per cent of North America funds available in the UK.
So which funds are doing well this time round? Well, at the other end of the scale, UK equities funds are performing relatively well, with only eight funds out of 246 failing to deliver, as defined by the above criteria.
Funds specialised in investing in European companies outside the UK are also doing quite well, with just four out of 97 Europe funds failing to make the grade.
Many equity managers – that is, the companies and financial whizz-kids who formulate strategies and pick stocks to include in their funds - have outperformed the FTSE All Share Index lately by reducing their exposure to the oil and gas and mining sectors, which are not having a good time at the moment.
A call to your local friendly independent financial adviser could be time well spent, to ensure that your money is invested in the best-performing funds, and ensure that, as we sail on into 2016, you are not missing out.
:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005
