Warning re Stakeholders/Personal Pension vs SIPPS

EdInvestor

As I've said before and this applies even more to people who are invested in retirement,the aim is not to be in the top performing investment class every year.

Rather it is to achieve steady consistent reliable returns, preferably of a superior nature,with a focus on rising income over the long term (young people can reinvest the income, whereupon the portfolio becomes a growth vehicle).

You are right that the HYP is an old fashioned concept, it has been serving people's needs for decades.

dunstonh

EdInvestor wrote:

As I've said before and this applies even more to people who are invested in retirement,the aim is not to be in the top performing investment class every year.

Rather it is to achieve steady consistent reliable returns, preferably of a superior nature,with a focus on rising income over the long term (young people can reinvest the income, whereupon the portfolio becomes a growth vehicle).

You are right that the HYP is an old fashioned concept, it has been serving people's needs for decades.

It isnt steady and consistent though. It is less volatile than some other sectors but it is not a low risk way to invest.

Personally, I have no problem with the strategy. I only have issues with it being presented as the best solution all the time and a low risk solution. It is neither.

You are relying on hindsight in a period where it has been best performing UK sector. A few years ago, TMF promoted FTSE100 tracker funds as being the best thing as that was when they were performing best. Now we see TMF promoting HYP as that is the area that has been performing best. The FTSE100 trackers have done nothing for the last 5 years. Shouldnt that give you some warning of what risk there is when you follow TMF's current fashion.

Some people may prefer a lower risk strategy or a higher risk strategy. HYP is not the answer for anyone. Indeed, it is not the answer for the majority. However, it continues to be recommended for everyone that posts on here even though we dont know a thing about their investment risk profile.

cheerfulcat

dunstonh wrote:

You are relying on hindsight in a period where it has been best performing UK sector. A few years ago, TMF promoted FTSE100 tracker funds as being the best thing as that was when they were performing best. Now we see TMF promoting HYP as that is the area that has been performing best. The FTSE100 trackers have done nothing for the last 5 years. Shouldnt that give you some warning of what risk there is when you follow TMF's current fashion.

This is incorrect. The Motley Fool HYP was started in 2000 ( though of course the concept is much older than that ) and was the very opposite of fashionable. It has done very well indeed. And TMF do not promote the HYP - quite the contrary!

whiteflag_3

Help :question:

EdInvestor wrote:

As I've said before and this applies even more to people who are invested in retirement,the aim is not to be in the top performing investment class every year.

Rather it is to achieve steady consistent reliable returns, preferably of a superior nature,with a focus on rising income over the long term (young people can reinvest the income, whereupon the portfolio becomes a growth vehicle).

You are right that the HYP is an old fashioned concept, it has been serving people's needs for decades.

Heres another post from Ed on another thread (i think we all know which one !) replying to the following I posted -

The rating is irrelevant. The fund isnt run to be top quartile, therefore its doing what its designed to do ( hence the popularity with trustees etc)

To which ed replied

Says it all, doesn't it?

I don't really think there's any need for further comment on this fund.

So let me get this straight, all pension fund managers must run their fund to be the best in their sector over every time period, where as the much touted HYP doesnt need to match these same high expectations.

So this week the HYP is suitable for retirement investment, yet the Scot Eq UBC was unsuitable last week as it has the same aims ie "Rather it is to achieve steady consistent reliable returns, preferably of a superior nature"?



No wonder the punters are confused !

EdInvestor

Not comparable Whiteflag. The HYP outperforms its their own sector, it doesn't come down the bottom of it, like that ScotEq dog fund.

What I'm saying is that it's not necessary to try to outperform the entire asset class -or other asset classes, which in the equity case alone might involve doing something very risky like punting a chunk of your fund on the Russian stockmarket, or whatever is the flavour of the year. Protecting against risk is very important in the HYP strategy and is obviously a major factor in drawdown.

BTW I should emphasise that IMHO an asset allocation strategy should be used by anyone in drawdown, so an HYP would be unlikely to be the only item in a drawdown fund, though it may make up a significant - or all - of the equity component of the portfolio. In that context it is low risk.Of course the investor must be happy to take equity risk.

There will be people using drawdown of course who are entirely invested in gilts, using it as a DIY annuity. I know someone who has a drawdown entirely invested in property funds ( a strategy which I would personally find far too risky).

Certainly an HYP won't suit anyone. But for those considering an equity component, it has significant advantages.

whiteflag_3

EdInvestor wrote:

Not comparable Whiteflag.

Certainly an HYP won't suit anyone. [/QUOTE

While I disagree with Eds logic , even I would have thought that the HYP would be suitable for someone! :rotfl:

[Deleted User]

well I am ecstatic!!! Three weeks after transfer from sw stakeholder to sippdeal

The sipp pension is now £4071 more than it would have been if left in scottish widows

and I am even more ecstatic now that I have appreciated that we will not be losing another 1% of the whole pension pot at the end of april because we moved to a sipp just in time.

Already we are megabucks better off

dunstonh

kittie wrote:

well I am ecstatic!!! Three weeks after transfer from sw stakeholder to sippdeal

The sipp pension is now £4071 more than it would have been if left in scottish widows

and I am even more ecstatic now that I have appreciated that we will not be losing another 1% of the whole pension pot at the end of april because we moved to a sipp just in time.

Already we are megabucks better off

Still not comparing like for like though.

Scot Widows could have grown 6.3% in that same timescale. However, that wouldn't necessarily be comparing like for like either.

From what little you have posted on this, it is clear that you are not comparing like for like with the investments you hold. Therefore the figures you mention are useless and unreliable and are not of any use to anyone wanting to compare the merits of a stakeholder against a SIPP. Sorry.

[Deleted User]

mistake made. I forgot to compare like with like and as SW funds update at 8pm I had to do a new calc as I did the previous one prior to 8pm. My pension pot is now £5787 better off than if I had kept it in the stakeholder. This amount is after all charges. Not at all bad after only 3 weeks.

cheerfulcat

dunstonh wrote:

From what little you have posted on this, it is clear that you are not comparing like for like with the investments you hold. Therefore the figures you mention are useless and unreliable and are not of any use to anyone wanting to compare the merits of a stakeholder against a SIPP. Sorry.

But dh, the whole point of SIPPs, and the reason why some people prefer them, is that they are not comparable to financial industry products. In any case the only meaningful way to judge investment performance is by results, i.e. the size of return and in kittie's case it seems pretty spectacular ( well done, kittie! ). Nor is this an isolated case; the people I know who have moved their pensions into SIPPs and chosen their own shares are very happy with their decision.