Sipp Pension Portfolio - What do you think?

philrush

Hi All,

Its my first post, so hope I'm posting this in the right section.

Basically I'm working on a sipp portfolio. I'm self employed and planning on doing this through Hargreaves and Lansdown.

I'm 29 and planning to invest 14.5% of salary each month, with a retirement age of 68.

I've done some research, but I'm completely new to investing, so if anyone could just take a look to see if this looks like a balanced portfolio I would appreciate it. Or alternatively any websites that show you how to balance a portfolio for a pension? I was planning to narrow it down to 6-7 but I have the following 10 shortlisted:

I would say my attitude to risk is moderate, and I understand as I have 39 years to retirement, I can afford some risk.

I am a little concerned of talk of a double dip recession, and wonder if now is the time to start with these particular investments.

So here are my 10 choices:

Global Emerging Mkts funds:

First State Asia Pacific Leaders Class A Accumulation Units

Cautious Managed Funds:

Invesco Perpetual Distribution Fund Accumulation Shares

Uk Smaller Companies:

Marlborough Special Situations

Specialist funds:

BlackRock Gold & General Income Units

Absolute Return:

Newton Real Return Fund Class A Income Units
CF Miton Special Situations Portfolio A Accumulation

Corporate Bonds:

M&G Strategic Corporate Bond Class X Income
Fidelity Moneybuilder Income Income Shares

Passive:

HSBC FTSE 250 Index Income Units
HSBC Pacific Index Accumulation Units

Thanks, Phil

jem16

philrush wrote: »

Hi All,

Its my first post, so hope I'm posting this in the right section.

Should really be in the Pension section. Perhaps you can ask one of the board guides to move it.

Basically I'm working on a sipp portfolio. I'm self employed and planning on doing this through Hargreaves and Lansdown.

Any reason why you are using a SIPP and only utilising funds? A personal pension would be cheaper.

Also why HL? You do realise that they take the full IFA advice fee but provide no advice?

I'll leave others to comment on the fund choice.

dunstonh

What investment strategy are you using? I cant really spot an obvious one from that mix.

You are mixing single sector funds with portfolio funds. Any reason for that?

What is your definition of "moderate risk"? (i.e. how much loss can you tolerate)

philrush

Thanks for the fast responses and help.

In reply to jem16,

I was advised a sipp would give me greater control of where I invest my money, and would potentially be a better investment choice.

My dad advised HL was a good choice, as does moneysavingexpert (on its pension page) I was looking at funds only as I thought this would be a safer approach to someone new to investing, rather than individual stocks.

As far as the HL fees for funds, it was my understanding that they discount a lot of the fees, at least the upfront fees.

In reply to Dunstoh,

My investment "strategy" is probably pretty naive. I've just researched some funds and chose the ones I've heard good things about in articles/newspapers etc.

I am unsure how to balance a portfolio exactly, but from what I've chosen i've tried to have some lower risk (bonds, absolute return funds) some higher risk (Blackrock gold, First state Asia Pacific) and I chose a couple of passive funds (HSBC FTSE 250 & Pacific) mainly due to lower charges/good performance.

By moderate attitude to risk, I'm saying I understand that investment is a risk, and I understand at the start of a pension you should be investing with more risk for the appropriate return at pension age.

My main goal is to have around 75% of my basic salary on retirement in real terms (£19,000 per annum) assuming 14.5% contributions. I do often earn much more than £25,000 a year, so I can probably contribute between £300-£500 a month to a pension.

atush

Funds are better than stocks for a novice, check.

But in ony taking into acct newpaper reports you are basing current investment on past performance perhaps?

Maybe you should have a quiet think about where you see the world economy and UK and Europe going. Emerging markets too. Maybe you want to stick with what is popular now and what has done well lately. And if we have a doulbe dip and markets get worse on a Greek default, maybe looking at what did well in 2009 is a good strategy.

Or maybe you think that things that aren't 'loved' now are better value (contrarian).

So do think about these things as I find the newspapers like to talk about what has gone well recently, not what hasn't. And most don't cover the whys either.

I myself am a bit leary of jumping in where/when others are. I like to jump when others are climbing and climb when others are jumping lol. Having said this I won big and lost a tidy sum during the tech boom when I was new lol. I doubled up or more on quite a few, but lost on others.

jem16

philrush wrote: »

I was advised a sipp would give me greater control of where I invest my money, and would potentially be a better investment choice.

Most modern personal pensions will also allow this.

My dad advised HL was a good choice, as does moneysavingexpert (on its pension page) I was looking at funds only as I thought this would be a safer approach to someone new to investing, rather than individual stocks.

It wasn't choosing funds as opposed to shares I was meaning. A SIPP gives the investor the choice of using investments that would not normally be allowed in a simple pension and if used for that then the SIPP is the obvious choice. When using funds the SIPP is not low cost and can be beaten by a personal pension.

As far as the HL fees for funds, it was my understanding that they discount a lot of the fees, at least the upfront fees.

Yes the initial fee is discounted but the main fee - the annual management fee - is not discounted at all. So the average amc with HL for managed funds is typically 1.5%, 0.5% of which is the normal trail commission paid to IFAs to service your pension. With the HL SIPP you are basically paying for advice which you are not receiving.

My main goal is to have around 75% of my basic salary on retirement in real terms (£19,000 per annum) assuming 14.5% contributions. I do often earn much more than £25,000 a year, so I can probably contribute between £300-£500 a month to a pension.

Have you considered seeing an IFA, paying a fee upfront for that advice but in the long run having a much lower amc than you would get with HL?

westy22

I have quite a lot of synergy with the funds you have chosen, except for Absolute Return funds which I don't like and have reservations about.

I also like the HL Vantage SIPP - the time may come in the future when you may wish to take a punt on some shares or the odd ETF so I don't have a problem with you choosing a SIPP over a PP because it gives some extra flexibility. There are critics of HL and there are fans - personally I like their website, their efficiency and their customer service so if they are making a few bob out of me I don't have a problem with it.

Many IFAs point out that you are paying for advice that you don't get with HL - that is true. Then, in the next breath, IFAs tell you that they themselves charge £250 per hour as an upfront transactional fee for advice and administration (minimum 2 to 3 hours) and many IFAs won't deal with pension pots below about £100k!

You must accept that you will always have no pay someone, something, somewhere - I choose to pay HL. You pays your money.....

philrush

Hi jem,

I've considered an IFA, but I had assumed it would be the more expensive option than doing it through HL. I guess I would need to weigh up the costs of having an IFA in comparison, as you right in that HL don't offer any advice. I would assume then an IFA would charge the upfront fee, that HL discounts?

Thanks, Phil

jem16

philrush wrote: »

I would assume then an IFA would charge the upfront fee, that HL discounts?

Thanks, Phil

An IFA would charge an upfront fee for advice but with a multi-charge personal pension that could reduce the amc which could work out better in the long run.

philrush

Hi Atush,

Yes I guess I am basing the fund choices on past performance, but It's really all I have to go off. I have been checking how they did in the crash, so the funds I have chosen have bounced back reasonably well from that.

Personally I think the stock market is in a bit of a state particular in the western world, so for a new investor this is worrying, emerging markets look attractive in asia, but this too is deemed risky by many. I wouldn't be surprised at a double dip recession, but I think anything like this can be overcome, as I don't think it will be as bad as last time.

For the same reason I'm reluctant to invest in property funds, as everything I read says property is overvalued. I also looked at gilts which didn't seem to get much positive press.

I take stuff I read with a pinch of salt, as I'm sure plenty of people will talk up funds to get investors for their own benefit rather than looking out for the actual investors. In that respect passive funds look attractive.

Thanks, Phil

philrush

Hi Westy,

Yes I have the same feelings, I like the vantage sipp, in that I can invest in other things later if I choose. Likewise the customer service is good and the website is easy to use. I have considered ETFs, from what I've read they seem to be a more short term version of passive tracker funds and a fairly new thing not usually found in some pensions. But it would probably be something I might look at later.

Thanks, Phil