'Risk-Free' Savings Over The Next 10 Years
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username12345678
Posts: 283 Forumite
Hi All,
I'm 44 and looking to save the equivalent of the ISA allowance each year for myself and my wife up to age 55.
I'm not looking for an inflation beating return because the purpose of saving is to allow me to draw the saved capital down over 10 years or so to give my SIPP extra time to do its thing (hopefully to age 65).
My first thought was to just use cash ISA's but is there an argument for using up 2 x Premium Bond allowances and perhaps 2 singles and a joint Santander account?
I've also been mulling over the idea of having say 3 trigger points for equity market falls (20, 30, 40%?) and if/when that happens switching 1/3 of the cash isa's value (at each point) in to a s&s isa and investing in a global tracker.
Are there major flaws in this plan or a better way of doing it?
Thanks!
I'm 44 and looking to save the equivalent of the ISA allowance each year for myself and my wife up to age 55.
I'm not looking for an inflation beating return because the purpose of saving is to allow me to draw the saved capital down over 10 years or so to give my SIPP extra time to do its thing (hopefully to age 65).
My first thought was to just use cash ISA's but is there an argument for using up 2 x Premium Bond allowances and perhaps 2 singles and a joint Santander account?
I've also been mulling over the idea of having say 3 trigger points for equity market falls (20, 30, 40%?) and if/when that happens switching 1/3 of the cash isa's value (at each point) in to a s&s isa and investing in a global tracker.
Are there major flaws in this plan or a better way of doing it?
Thanks!
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Comments
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Are there major flaws in this plan or a better way of doing it?
You start by saying you want risk free. Although in reality, you appear to be saying you are happy to have shortfall risk and inflation risk but dont want investment risk.
Then you say you are considering going into very high risk at certain trigger points. This includes trigger point amounts that typically only happen once in a generation.
It seems you are trying to time the market and consider both ends of the risk scale and ignore the things inbetween. In doing so, you are taking more risks and likely to end with lower returns.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
You start by saying you want risk free. Although in reality, you appear to be saying you are happy to have shortfall risk and inflation risk but dont want investment risk.
I can see how it reads that way.
I'm comfortable taking on the inflation risk on the basis that at current levels i'm giving up around 1-2%. The shortfall risk doesn't really apply because if the markets do suffer a sustained reverse i'll work closer to 60 rather than leaving at 55. I'm looking to avoid investment risk with this pot as i've probably got enough risk sat in my SIPP.Then you say you are considering going into very high risk at certain trigger points. This includes trigger point amounts that typically only happen once in a generation.
Lets hope so!
I'd be quite happy for the savings to sit in the ISA's for the next 10 years and not see the equity markets. If however we do see drops of 20/30/40% then my view at that point will be different and i'd consider it an opportunity to be grabbed rather than run away from. Granted that's easy to say now.It seems you are trying to time the market and consider both ends of the risk scale and ignore the things inbetween. In doing so, you are taking more risks and likely to end with lower returns.
I'm looking to avoid risk (accepting inflationary effects) with something that is shorter in investment timescale and will enable me to leave work earlier. I accept my main SIPP could be invested for 40 plus years so needs to be exposed to risk to generate the returns i'd like to see.
The thoughts about switching to equities is based on accepting that the markets had hit my SIPP stopping me leaving when i'd planned because of sequential risk - so why not invest the 'early go' money anyway in what could be value.
Thanks as ever for the challenges to the thinking - much appreciated!0 -
Diversification is key, you will lose money in cash user extended time periods.
Losses to inflation have been muted in recent times, but particularly in the uk the actual value of the money is reducing in purchasing power terms.
Over the last year compared with equity investment you would probably have lost 15-20% comoared to diversified equities, say 8% compared to p2p and a fair bit comoared to property.
Inflation is also heading up, partially due to sterling weakening and partly as its specific government policy to erode debt levels, so teh hit on cash is likely to increase over the next few years.0 -
What do you hold in your SIPP?Save 12 k in 2018 challenge member #79
Target 2018: 24k Jan 2018- £560 April £26700 -
Are you a high rate taxpayer ?
If so, are you saving the maximum in your SIPP ?
If the answer to that is yes and no in that order, then you can get 20% by just putting the ISA money into the SIPP. E.g. 20% uplift if you get 40% relief going in and pay 20% coming out. Crudely that's a guaranteed 2% for this years contribution over ten years, 20% for the last year, and points in between for the rest. Maybe an average of 10% ?
Lifetime allowance in the SIPP may be an issue of course.0 -
If (big if) you wish to create a pot of 'cash' reserves that you can draw on and you do not wish to entertain investment risk but are comfortable with inflation risk why not open a SIPP account with HL and leave it as cash (AnotherJoe's questions outstanding).
That way you would benefit from the government top up of your contribution plus any additional HRT relief available; this would to some degree mitigate the effect of inflation on your own contribution. Plus HL do not currently apply any platform/AMC charges for cash in the SIPP.
This is not an approach I would recommend but if that is your choice it may make sense for you.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
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AnotherJoe wrote: »Are you a high rate taxpayer ?
If so, are you saving the maximum in your SIPP ?
If the answer to that is yes and no in that order, then you can get 20% by just putting the ISA money into the SIPP. E.g. 20% uplift if you get 40% relief going in and pay 20% coming out. Crudely that's a guaranteed 2% for this years contribution over ten years, 20% for the last year, and points in between for the rest. Maybe an average of 10% ?
Lifetime allowance in the SIPP may be an issue of course.
I am a higher rate taxpayer but over my LTA so additional SIPP contributions probably aren't the way i'd want to go.0 -
username12345678 wrote: »I am a higher rate taxpayer but over my LTA so additional SIPP contributions probably aren't the way i'd want to go.
Oh well so much for that cunning plan !
What about your wife?0 -
AnotherJoe wrote: »Oh well so much for that cunning plan !
What about your wife?
She's a basic rate taxpayer with a CS pension.
Are you thinking of opening an additional SIPP for her?0
This discussion has been closed.
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