Investment plan - thought appreciated

WoB

After a previous post and feedback, I have been assessing what I should do regarding pensions and ISA's. Here's some background - I'm 45 with no intention to retire until at least 55, so looking at a minimum 10 year plan. Myself and my wife have no current S&S ISA's but do have a decent build up of cash ISA's + savings, etc. I am coming to the end of my first year as a limited company contractor hence the new focus on what to do to be more tax efficient and investing in something which can beat the current low interest rates. We have an 80k offset mortgage remaining but it's only 1.25% interest currently so the cash is better elsewhere at the moment - only just mind!

I have approximately 10k now and 1.5k per month going forward to pay directly from the company into a pension in order to then satisfy corporation tax and leave a tax efficent salary/dividend scenario. I am then looking to put a decent portion of that profit into S&S ISA.

Pension-wise I currently have a Scottish Widows pension worth approx 100k invested in:
SW SSgA Int Eq Index (70%)
All Share TRACKER (25%)
Property (5%)

As you can see this is top heavy in equities which is what I'd wanted when I started this several years back. I'm thinking that with my age and the fact I will now be in a position to pay more in the pension that I should reduce that risk. Also, the pot has grown quite well and the general consensus seems to suggest the market may be peaking.

So, I am looking to remain in passive/tracker style funds but reduce the equities split to either 40/60%. I am also looking at moving providers to try and benefit from lower charges etc. I was wondering whether having a split of funds might be a good option - fund 1 with a lower risk 20% equities to transfer the current pot/lump sum from the company, fund 2 with a moderate risk 40% equities for the monthly input. Any thoughts on this? Waste of time?

As mentioned in a previous thread I'm looking at the Vanguard Lifestrategy products as they seem to be popular on here.

Would appreciate thoughts on the above, specifically the move from my current SW funds to a Vanguard LifeStrategy 40/60 split.

With profits coming out of the company I am looking at S&S ISA's - maybe £500-1000 per month. I will follow the risk-type profile/recommendation of funds which HL offer. Appreciate this is the Pensions forum so won't ask for too much advice here, but does this sound reasonable?

dunstonh

Pension-wise I currently have a Scottish Widows pension worth approx 100k invested in:
SW SSgA Int Eq Index (70%)
All Share TRACKER (25%)
Property (5%)

That isnt very well invested. high risk approach (which may be too much for a 10 year period but if you can afford the risk, then it is not a disaster level.

Also, the pot has grown quite well and the general consensus seems to suggest the market may be peaking.

Who knows? There are plenty saying that it is and plenty saying that it hasnt. No-one knows. That is why you generally ignore them. and invest in a way that is suitable for your risk profile and diversely invested.

I was wondering whether having a split of funds might be a good option

Depends on what investment strategy you intend to use and how frequently you will rebalance and review. If you dont intend to then you should stick with multi-asset funds.

As mentioned in a previous thread I'm looking at the Vanguard Lifestrategy products as they seem to be popular on here.

Just because something is popular, does not make it right. Endowments were popular. Tech stocks were popular. You saw Arch cru mentioned on here a fair bit as a good low risk option before it promptly went on to fail. Now, VLS is not going to do that but when you weigh up the cost of using VLS exclusively in a pension, then you may as well look at the multi-asset in house options which are normally a fair bit cheaper and provide similar returns,

I will follow the risk-type profile/recommendation of funds which HL offer.

You mean on their marketing list? They dont do recommendations.

Linton

Derisking with at least 10 years to go would seem over-cautious to me. The equity market may or may not be peaking - it will peak (or not) many times more in the next 10 years.

However you may have more than enough money to meet all your needs and wont want to retire earlier and so can afford to take little risk.

Triumph13

There's also the question of exactly what 'low risk' investments you diversify into. Many would say that there is a lot more downside risk than upside in current bond valuations.

bigadaj

It would be worthwhile knowing what sums you have invested in cash savings and isas, I always prefer looking at a financial situation in the whole and whilst you are wholly in equities in your pension, these cash sums would reduce the overall risk level of your finances.

HL are considered good for ease of use and customer service, but read through some threads on here and you'll see many are concerned by their costs, not so significant as you start out but they will cost you in charging out down the line.

Thrugelmir

WoB wrote: »

Here's some background - I'm 45 with no intention to retire until at least 55, so looking at a minimum 10 year plan.

Ten years isn't very long to build up a sizable pension pot.

What annual income are you hoping to have?

WoB

Thanks for responses so far. I bit of feedback...

dunstonh - When I mentioned having a split of funds what I meant was having the original pot in a lower risk fund (eg. 20% equity) with the ongoing payments put into a moderate risk (eg. 40% equity). I would review every year maybe. Do you think there is any benefit in doing this? If I look at in-house options are the providers much of a muchness and it then comes down which has the lower AMC's? With regards to S&S ISA on HL website, it was the funds 'suggested' via the Tracker Portfolio risk/investment checklist.

Linton - I appreciate no-one really knows where it's going. I am just looking at it historically but again can see this doesn't necessarily tell you anything also! I am planning to de-risk slightly as I'm almost exclusively in equities. I thought a 40/60 split would suit my age.

Triumph13 - From what I can see, the Vanguard funds use bonds and gilts as the 'low risk' part of the fund. I guess this is a standard process for mixed asset style funds?

bigadaj - We have around 123k in cash/ISA's/NS&I Savings etc. But as mentioned the mortgage is 80k so only a 43k cash surplus. I am expecting this to grow next year as I won't be putting all earnings into pension/S&S ISA. I have still to determine how much to put into S&S ISA - my lack of knowledge scares me from investing too much in this! :-)

atush

If you diversify out of equities by so much, what will you put the money in? Bonds and gilts have been popular and so are expensive and will fall when interest rates rise?

dunstonh

When I mentioned having a split of funds what I meant was having the original pot in a lower risk fund (eg. 20% equity) with the ongoing payments put into a moderate risk (eg. 40% equity). I would review every year maybe. Do you think there is any benefit in doing this?

If you run a structured portfolio following a defined strategy then that is fine. If it is just a random selection of funds using random allocations then less so.

If I look at in-house options are the providers much of a muchness and it then comes down which has the lower AMC's?

Exceptions apply but there is only so much you can do on low cost internal funds and returns dont differ too much.

WoB

Thrugelmir wrote: »

Ten years isn't very long to build up a sizable pension pot.

What annual income are you hoping to have?

I guess about 20k to be comfortable.