Performance Update – 5th February 2019

I saw the following article in the Sunday Times at the weekend and thought it would provide the context for a Performance Update on a selection of the EBI Portfolios, which most of our clients use.

I have underlined a few of the numbers from the article, as I wish to comment on these at the end.

The article is by Holly Black under the heading ‘Worst Year for Pensions since 2008’.

Savers saw the value of their retirement pots drop last year as pension funds suffered their biggest loss in a decade.

The average fund’s value fell by 6.2%, due to markets tumbling in the final three months of the year. Fewer than 1 in 10 funds rose over the year as technology stocks fell out of favour with investors and Brexit worries increased.

Figures from the data firm Moneyfacts show pension funds in the UK smaller companies sector suffered the greatest loss, down 13.9% over the year, while those in European equities, including the UK, fell 13.6%. UK direct property was the only sector to finish in positive territory, up 4.4%.

The poor performance will be a particular blow to retired people who have moved their savings into drawdown since the pension freedoms were introduced. They withdraw an income in the expectation that investment returns will replenish their pot. This is much harder to achieve when stock markets fall.

Jason Hollands of the financial adviser Tilney Bestinvest said: “The stock market turbulence in 2018 serves as a stark reminder that income drawdown is not for those of a nervous disposition.

“These retirees need to be sure they are not taking out too much, otherwise they run the risk of draining their pensions of assets too rapidly. No one wants to run out of money partway through retirement.”

Last year was the first time since 2011 that the average pension fund shrank in value. In 2017, the average return was 10.5% and in 2016 it was 15.7%.

However, while the average fund fell 6.2%, losses were far greater at the height of the financial crisis. In 2008, the value of the average pension fund plunged 19.7%.

The negative returns of recent months are a worry for people due to retire in the near future, who may now have less money saved than they had planned for.

Hollands said: “Anyone who anticipates retiring soon is likely to find the pot they may have intended to use to purchase an annuity won’t go as far as they may have expected just 12 months ago. They may require a rethink of their plans.”

The article provides a useful reminder that the level of investment returns required for a successful retirement strategy are seldom delivered in a nice steady, easy to predict way. In the article we can see that the average fund’s value fell by 6.2% last year but returns in 2016 and 2017 were positive 15.7% and 10.5% respectively. In 2008 however, the average fund fell by 19.7%.

Just for comparison purposes, the following chart shows how a range of the EBI Portfolios fared between 1st Jan 2018 and 31st December 2018. Unsurprisingly, the worst performer was EBI 100 which registered a drop of 8.34% (ouch, that’s where my money is invested) but EBI 60, the most popular portfolio fell by just 4.92%.  


The ups and downs above represent anything but a smooth ride and yet the average annualised return from EBI Portfolio 60, over the past 10 years, to the close of business on 4th Feb 2019, is 8.79%*. After allowing for inflation and charges, that looks like an annualised real return of something around 5.0% per year.

The point is, we have to take ‘the rough with the smooth’, accepting that there will be occasional spectacular years which are offset by occasional catastrophic years.    

In closing, I thought I would cheer everyone up by showing how the same portfolios have performed since the beginning of 2019. It’s disappointing that we don’t hear this kind of positive reporting on the news.


Heartening though the above is, it is entirely possible that markets could fall again before they eventually test new highs, whenever that may be.

As always, if you have any questions about the contents of this e-mail or any aspect of your financial planning, please do not hesitate to get in touch.

Yours sincerely


Graham Ponting CFP Chartered MCSI

Managing Partner

* Source: FE Analytics 5th Feb 2019.