Vanguard Life Strategy

jem16

badger09 wrote: »

Re the pensions - Flexible Drawdown is not applicable as it is a Public Sector pension.

James was suggesting you invest now with the pension wrapper as opposed to the ISA wrapper. Then you could use Flexible Drawdown to release the money from the pension.

badger09

brasso wrote: »

Instead of buying a big chunk of VLS once a year, you would probably be better off spreading your purchases over the year to achieve a 'pound cost averaging' effect.

As for doing more analysis, well, JamesD makes some good points though I was under the impression that the UK comprised the biggest component of the fund. To be honest, for 5K or so, I wouldn't agonise too much. Make a decision and do it. If you want to invest all at once, perhaps 50% in VLS and 50% in a decent emerging markets fund. I have VLS80 myself but am a bit disappointed that there isn't more emerging markets in what is supposed to be a global tracker.

Sorry, not clear, but I wasn't planning on investing the £5k all in one go. Probably around £1k a month.

jamesd

badger09 wrote: »

Re the pensions - Flexible Drawdown is not applicable as it is a Public Sector pension.

Your public sector pension plus your state pensions may make it easy for you to get £20,000 of guaranteed income. That would then let you get the tax relief on a personal pension without the lock in that is a disadvantage of a pension normally, because flexible drawdown removes that lock in.

The UK stock market is also quite high so that portion doesn't help too much with reducing the US component since reducing the UK component would also be good. Easy enough to do by buying something else as well, though.

badger09

jem16 wrote: »

James was suggesting you invest now with the pension wrapper as opposed to the ISA wrapper. Then you could use Flexible Drawdown to release the money from the pension.

Really?

"Is the total value of your occupational and state pensions over £20,000? If so you might find it useful to read up on Flexible Drawdown, which lets you take all of the money out of a personal pension pot. That can make personal pension use a great deal because it removes the lock up aspect".

I assumed he was asking if my 'pension pot' was big enough to provide a pension of at least £20k and if so, I should consider Flexible Drawdown. Unless I've got completely the wrong end of the stick, I don't have any control over my 'pension pot'.

Happy to be enlightened

ozzage

jamesd wrote: »

A global developed market tracker fund has between 50% and 60% invested in the United States, where markets are currently around record highs. Mixed asset global funds like LifeStrategy have that much in their equity portion. Buy low, sell high is general advice.

The Vanguard LifeStrategy 80% has around 26% in the US so I'm not sure that this advice really applies here. The highest allocation is in the UK actually, for better or worse, and then a fair bit in Europe.

Like jamesd, I would prefer a bit more emerging markets exposure but my advice is, as always, not to complicate things so I wouldn't really worry too much about that. It's a good balanced fund and you could do much worse.

The MOST important factor is whether you have time to wait for a recovery if the markets crash! It sounds like you do, since you have plenty to live off without touching this.

jem16

badger09 wrote: »

I assumed he was asking if my 'pension pot' was big enough to provide a pension of at least £20k and if so, I should consider Flexible Drawdown. Unless I've got completely the wrong end of the stick, I don't have any control over my 'pension pot'.

Happy to be enlightened

The rules for Flexible Drawdown mean that you have to have secured pension income of £20k. Final salary pensions, pensions where an annuity has been taken and the state pension provide that secured pension. As you have rightly said, your public sector pension doesn't have a "pot" as it's a defined benefit pension.

If you now choose to invest within a SIPP or PP instead of a S&S ISA, you would then have additional funds that would attract 20% tax relief and which you could then enter into Flexible Drawdown with. This would allow you to take 25% tax free and the rest could be taken as a lump sum subject to normal income tax.

In other words if you had £20k of secured income with your public sector pension plus your state pension and then built up a SIPP pot of £20k, you could take £5k as a tax free lump sum and have the other £15k taxed at 20%.

jamesd

ozzage wrote: »

The Vanguard LifeStrategy 80% has around 26% in the US so I'm not sure that this advice really applies here. The highest allocation is in the UK actually, for better or worse, and then a fair bit in Europe.

The US isn't at the same weight as a global ex UK tracker but the UK part is too highly weighted anyway, even if the UK market wasn't high itself.

ozzage wrote: »

Like jamesd, I would prefer a bit more emerging markets exposure

It's not so much high emerging markets as reduced US and UK weighting that I'd be after. Because I dislike buying high and buying the UK at a weighting much above its global weight.

Glen_Clark

Is it that UK shares are high, or the pound is low making everything seem expensive?

jamesd

The FTSE 100 is quite high in index value terms. Getting close to its past two peaks a bit above current levels, though not if inflation-adjusted. Better time to be selling than buying the FTSE because there's an inverse relationship between index value and future returns - likely to do better buying at low values than high. Though like the US it could easily continue to rise for quite a while longer yet.

Can't ever pick absolute highs, so best to observe it's not in a dip when it's particularly good value and maybe look to buy less of it now and more at a future time when it's well down. Or maybe buy something else for UK cover: value, managed, smaller companies, other asset classes, whatever seems sensible.

I haven't yet started to buy doubly leveraged short ETFs, covered warrants or options to reduce my effective exposure to the US and UK big companies within index funds but I have been thinking about it. And I still hold quite a bit in a doubly leveraged long FTSE All Share Index tracker ETF, LUK2.L.

Situations like this are one of those where I'm not a great fan of tracker funds (around 40% by value of my biggest pension pot is in trackers) because they are sure to follow an index down.

None of this means that the Life Strategy funds are inherently bad, though. Just that now might be a better time to be buying more of other things and saving the Life Strategy funds for later. Or less now than desired, and more later to catch up at lower cost.

Glen_Clark

Well after hearing the Chancellor is printing or borrowing money to lend out interest free on second home £600k 95% sub prime mortgages I think those conventional economics have gone out of the window.