UK pension accounts

AE's Avatar

AE

11 Oct, 2016 12:11 AM

Hello

I have been trying to figure out how to represent pension accounts similar to those in the UK where a monthly contribution is made which is then invested by the pension management firm in a huge basket of funds - for a fee, of course, and every so often also with returns...

This is the model not only in the UK but also in other countries...

I saw a thread about this from 2010-2012 which was closed, which also said that an issue was raised about it:
http://help.infinitekind.com/discussions/general-questions/1299-how-to-represent-a-pension-investment-account/page/1
Has this been resolved yet by any chance?

As a newbie, I am confused as to the tradeoffs between defining this as an asset vs. defining it as an investment.

Thank you

  1. 1 Posted by AE on 11 Oct, 2016 07:35 AM

    AE's Avatar

    Another important feature of these accounts is that they are not liquid before a given age (say. 65).

    This is important to know because if I input them as an "Investment Account" with an initial balance of X, it will show up as cash in my Asset Allocations. Which it definitely is not.

    Thanks

  2. 2 Posted by dwg on 11 Oct, 2016 08:03 AM

    dwg's Avatar

    This is not dissimilar to superannuation in Australia.

    I personally believe that handling it as an investment is the best way to go,especially as provided it is well setup allows you to track performance etc.

    It is also pretty common for these funds to be structured as a master fund, in other words you place money in a fund and it in then invests in other funds, usually these other funds are wholesale funds i,e, retail investors cannot directly invest in them they must invest via a master fund structure.

    In my case one of the master trusts I am in allows you to select from a couple of hundred funds you could invest in., in my case last time I counted I was investing in 20+ odd funds.

    It is worth noting that in many cases it is extremely difficult or impossible to track the individual funds, pricing information is often not available for wholesale funds or the data you get is not of the detail needed and once you get more than a few funds the number of transactions that reflect distributions, fees, re-investments etc can easily be in the hundreds per quarter.

    My methodology is to set up an investment account and I create a security that represents the master fund, which I add to the investment account in the normal way.

    For my initial transactions i assume that the price of the security is $1 and thus the initial number of units is the same as the dollar value of the transactions.

    Thereafter the unit price is calculated by dividing the current value of the fund by the number of units I "have" which initially is the same as the amount of my initial investment.

    I handle sales and purchases by calculating the current price just before the transaction then using this as the unit price for the sale or purchase. I created a spreadsheet that does these calculations for me, especially useful as I update the value monthly, hence my calculated number of units will reflect my ongoing holdings and take into account sales and purchases similarly to how you work with shares.

    You cannot just put the funds in an investment as you stated in your response #1 you have to create and use a security, otherwise the result is just equivalent to holding cash as you have noted.

    Infinite Kind have done very little in investment handling for some years, so there have been no significant improvements in my opinion.

    Handling as an Asset will give you very little in my view, you would basically be able to keep the value up-to-date, you can use categories to record various things like increases/decreases in value but reporting is limited in terms of what you can show.

  3. System closed this discussion on 10 Jan, 2017 08:10 AM.

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