SIPP - Who To Go With and What to Invest In?

Sun-Is-Fun

I am in my early forties and would like to start paying into a SIPP until about 55. I have spent two full days off work looking at various providers and the plethora of investment options. My brain aches !

Fidelity seems like a decent choice of provider, as their charges seem lower, unless anyone can recommend an alternative?

I am struggling to choose which investment options as there are so many ! I would say I would like to take about medium level risk. I have thought about UK FTSE tracker and World Tracker. Would these be a good choice or any other recommendations?

Thank you for your time.

jamesd

A world tracker would be a good choice. Those come in several versions:

1. whole world
2. developed world (the major economies)
3. whole world or developed world ex(cluding) UK.

Type 1 would be the one to go for as the core of a portfolio since that would normally include a reasonable UK weighting. Some of these might have a higher than correct UK weighting if aimed at the UK audience because it is common for people to want to invest more in their own country.

The ex UK types are good if you want more control over where your money goes in the UK.

Both the FTSE and world trackers can be expected to drop about 20% a few times every ten years and 40% once or twice every ten years.

By their nature the global and FTSE tend to invest almost exclusively in big companies. You might want to add a global smaller companies fund or some regional smaller companies funds as well to counteract that. Adding smaller companies will increase the potential drop.

To reduce the potential for drops it is traditional to add bond funds. Depending on type they might drop by 10-20% instead of 20-40% and maybe not at the same time as equities/shared. There's a catch with that at the moment because bond funds like US markets are at very high prices. This makes both bonds and the US markets not good buys today. This doesn't mean that they can't go higher, just that historically buying at highs tends to reduce gains in future years compared to buying at less high prices.

One alternative to bonds is commercial property funds. In the UK at least those have not yet gone to highs.

greenglide

Or, of course, you could open a personal pension and use the pension provider's default funds which tend to have lower charges.

It depends on why you wish to make this investment - targeted investment to fill a gap between retirement age and state pension, main retirement savings etc?

Nickolai

In a similar situation, just waiting for my transfer to go through from a old personal pension and must have highlighted 20 possible funds to invest in.

Thanks for the info!

dunstonh

Fidelity seems like a decent choice of provider, as their charges seem lower, unless anyone can recommend an alternative?

Although their platform software is long in the tooth and finicky compared to others.

I would say I would like to take about medium level risk. I have thought about UK FTSE tracker and World Tracker. Would these be a good choice or any other recommendations?

Not for medium risk. They are both above that risk profile. However, perhaps you should put your definition of medium risk in context as one persons medium is another persons high.

Also, picking a single sector fund with a limited multi-region 100% equity fund is not good quality investing. You lack the diversity of the different asset classes and that pushes the risk level up.

Why do you want a SIPP and not a personal pension?

atush

Your two questions seem to me to be those of someone who should consider an IFA. Having said that, at least you have done some research.

But as in posts 3 and 5 you are asking for a SIPP which can include specialist investments and single shares (high risk) so why not a personal pension which can be cheaper?

Do you have a S&S isa? Did you set it up yourself and who do you use?

Sun-Is-Fun

No real reason why I would prefer a SIPP really. Just read that they seem preferable to personal pensions or are they? A personal pension would be ok I guess.

I do have a small amount (less tha 3k) in a S+S ISA - that is with Fidelity - and I did set that up myself. I did consider topping that up instead, but thought the pension route would be better?

I did pay into teacher AVC when they were popular a few years ago, but stopped as I needed the money. I have read now they are not a good option, but not sure how accurate this is. I could reopen that account at any time.

To give a little bit more information - I am a teacher who wants to be out at 55 (it's not the job it used to be !), but will not claim that pension until 60 as the benefits are greater. I have just under 18 years contributions so far and will have about 28-30 years service at 55, as my work varies from full to part time.

I have looked into topping up my pension pot with teachers pension as you can buy additional amounts, but the costs are very high, plus I am concerned that if I die, all that extra money invested would not go to my kids. Using the funds on a separate pension, they could access that, I believe in case the worse happens.

The additional pension required is to cover that five year gap coupled with savings to get me until 60, so I can claim my teacher's pension, in case I can't get another job !

Hope all of this makes sense and thank you all for your answers so far.

atush

Well a pension is better than an ISA or AVC for your situation of retireing early but not taking a DB pension until scheme age as

1- the AVCs are tied to scheme age (or at least used to be I am going to assume they still are?) and
2- as you will withdraw your DC funds while you have no income you can get tax relief on the way in, and pay no tax on the way out

Personal pensions can be better than sipps with cheap default funds to use, sipps have a lot of options you probably dont want such as single shares, commercial property etc.

So you maybe first need to decide what you want to invest in, and to balance your portfolio with your S&S isa one? Then choose the platform that would be cheapest for your amt of saving and your fund choices.

dunstonh

No real reason why I would prefer a SIPP really. Just read that they seem preferable to personal pensions or are they? A personal pension would be ok I guess.

PPPs can be best. SIPPs can be best. Statistically, most people are better off with a PPP rather than a SIPP (or a stakeholder pension which is the third option)

Its all about choosing the best that fits what you want to do. SIPPs are popular in the DIY world where there is less regulation and people are free to make their own mistakes. In the advisory world where regulation is higher, PPPs are more popular as the regulator and ombudsman treat SIPPs as more advanced options.

SIPPs are geared towards the more experienced investor looking for more advanced investment options.

Sun-Is-Fun

Thanks. You can take the teacher AVCs at 55. I have also thought about going down the property route of buy to let instead or an additional pension - this would consume all my savings, plus I'd need a mortgage to purchase. My brain aches with what route to choose for the best !

atush

If you own your own home, that would be putting all your eggs in one basket.

Plus you really need more than one rental in a portfolio to sustain retirement. Plus you should have skills and experience in the area. It probably isn't suitable for you to invest that way for income in retirement.