MONTHLY NEWSLETTER – OCTOBER 2023

New data has unveiled that the largest pension fund in the UK is valued at £11 million. Wealth manager RBC Brewin Dolphin obtained this information through a Freedom of Information request. It was discovered that a single UK saver had accumulated retirement savings of £11 million. Additionally, 929,000 savers have amassed pensions ranging from £1 million to £2 million. Another 128,000 individuals possess pension funds totalling between £2 million and £3 million, while 46,000 investors have built up pensions exceeding £3 million.

According to data from the Office for National Statistics, to be part of the top 10% of retirement savers, individuals need to have pension assets amounting to £374,500, with the median figure standing at £637,500. The specific circumstances of the person with an £11 million pension are unknown. However, RBC Brewin Dolphin estimated that such an individual could anticipate an annual income of £540,000 over a 30-year retirement period, without worrying about depleting their savings.
Rob Burgeman, an investment manager at RBC Brewin Dolphin, emphasised the impact of compounding in helping pension pots grow. Considering tax relief, a monthly contribution of £100 (effectively costing £80 per month) would amount to total contributions of £9,600 after ten years. With compounding and assuming 5% annualised returns after fees, this pension pot could potentially grow to £15,592. Burgeman explained that over 20 years, the same contribution plan could see the total contributions of £19,200 more than double to £41,274. An additional 10 years could result in contributions of £28,800 growing to as much as £83,572, while 40 years of contributions totalling £38,400 could potentially reach as high as £153,237.
He continued by noting that thanks to employer contributions and auto-enrolment, even individuals with modest incomes can aspire to accumulate substantial retirement savings. He highlighted that the government had recently announced support for a private members bill that would lower the auto-enrolment age from 22 to 18. If someone were to enter the workforce at age 18 and contribute £389 per month to their pension, they could reasonably expect to retire with a £1 million pension pot by age 68, assuming annualised returns of 5% after fees.
Burgeman further explained that in the first decade, the investor’s pension pot could grow to £60,181 based on contributions totalling £46,680. Ten years later, their retirement savings could more than double to £158,210, considering contributions of £93,360. After 30 years, they could potentially accumulate £317,889 based on investments totalling £140,040. By the time they complete 40 years in the workforce, they could have a retirement fund worth £577,990, all from contributions totalling just £186,720, according to RBC Brewin Dolphin’s calculations.
He concluded by emphasising that it’s in the last decade before retirement that the possibility of becoming a millionaire becomes a reality. After 50 years, the pension pot could exceed seven figures with contributions totalling just £233,400. These figures underscore the power of compounding in pension growth. Furthermore, unused pension funds can typically be passed onto the next generation without losing anything in inheritance.

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As people spend less, company profits fall, and share prices tend to follow. This generalisation isn’t always helpful though.
That’s because not every part of the stock market is the same. There are some sectors more defensive than others, where business models are built on necessities rather than luxuries.
Supermarkets tend to be ok during recessions as we all need to buy food, even when watching the pennies. But fashion retailers and restaurants have a tougher time – we don’t need to dress up or eat out.
The defensive nature of these businesses ultimately comes back to human psychology. What do we value most?
It turns out that health is right at the top of the list. Our own health (and that of our families) is one of the most tangible things in existence.
When you wake up in the morning, you don’t know anything about the state of the economy, but you absolutely know whether you’ve got a headache, or a fever, or a sprained ankle. Importantly, you’re prepared to do something about it, a visit to the GP or the medicine cabinet. So, healthcare companies are the best example of benefitting from necessary spending regardless of the economic environment. Also, many of these companies have governments as one of their big customers, and they would be very reluctant to take away health spending during difficult times.
It shows up in their earnings performance during recessions, as the chart below shows. While other businesses suffer from fickle consumers during recessions, healthcare company earnings don’t even flinch …

And that earnings growth usually results in pretty good returns …

In an uncertain world, human psychology remains pretty reliable; and so do businesses exposed to it.

The top 1% wealthiest people in the world have 50% of the world’s wealth according to Oxfam.