On pensions, it's best not to let sleeping dogs lie

It's best not to let sleeping dogs lie when it comes to your pension

NO matter how little money and how few possessions you own, having a dog makes you rich.

If you love dogs, these words by the American author Louis Sabin are sure to warm your heart. In financial terms though, you’d be better off killing your dog right away – and not just because of the price of dog food.

However, I’m not referring to our cuddly pet friends but to so-called ‘dog funds’, under-performing investment funds where, if you have a pension, your money could well be invested at this very moment.

As you work hard every week and make pension contributions every month, that money doesn’t just lie in a massive bank account somewhere, waiting until the day when you come to ask for it back. It is invested, mostly in the stock market, so that it will grow and accumulate for you over your working life.

That’s the idea, anyway, and if you keep an eye on where they’ve put your money, it can work out very well. But if you just leave it, and don’t do regular or annual checks, much of your money could be lying in some of these doggy under performers I mention, and effectively losing you money you could have had.

However, there is something you can do! If you simply have an adviser run some checks and make some changes for you, you could get a far, far better return on your investments, and a much better pension when you retire.

The new ‘Spot the Dog’ funds report by Bestinvest shows the problem is worse than ever before, since records began over 20 years ago. There are currently 111 seriously underwhelming funds in the UK – and they are massive, holding a total of £54.6 billion that could be growing much more quickly, if it were invested in better funds.

Here’s an example of what could happen to your money, if it’s in the wrong place at the wrong time – looking at two very common fund types, and bearing in mind that the amount of your investment can fall as well as rise.

Someone who forgot to check up on his pension investments, and so had £100 stagnating in a dud fund in the “UK All Companies” funds category over the last three years, would have seen his investment fall in value to a three-year return of just £86.

But his clever colleague, who asked an adviser to look at her pension and switch her £100 into a top performing fund, could have achieved a three-year return of £135 – and so would now be £49 up on her male colleague, for the same £100 investment.

Same story in the funds category ‘UK Equity Income’. Mr Forgetful’s dud fund would have returned just £84, while Miss Clever’s top performer returned £121, leaving her £37 better off than him.

Having an adviser look at your pension makes a whole lot of sense – but don’t just take it from me: the experts who put this report together have some clear advice for anyone who has a pension: check where your money is.

However, dog funds aren’t the only side to the investment conundrum. Bestinvest point out that even good investments can shift and slip into under performance over time, “potentially turning an initially low-risk portfolio into a much higher-risk one.”

For that reason, they add: “Is it time to take a hard look at all of your investments? ... it is important to regularly review all of your investments and check whether they remain right for you.”

Or, to put it in plainer terms, if you don’t check whether your pension savings are ‘going to the dogs’. Bestinvest think you’re ‘barking’ mad!

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005 . Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or at

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