Is 4% a reasonable assumption for return in SIPP

BLB53

If I could find a single fund that offered great diversification and low charges and something like a 4% after charges return I suspect I would be better off than the hap-hazard approach and portfolio I have ended up with.

You could take a look at the Vanguard Target Retirement funds...basically a blend of their underlying global equities/bonds which adjust the proportions as you get closer to your retirement date...just select the appropriate fund with the date closest to when you want to retire...very simple and low(ish) charges at 0.24%.

Alternatively look at their Lifestrategy range.

Just be aware that charges with HL can work out expensive on funds adding an extra £450 p.a. for £100K of holding.

edinburgher

BLB53 wrote: »

The longer term average for equities is ~5% p.a. so I would think between £600K to £700K would be likely but be prepared for a few dips along the way...it never goes up in a straight line!

In the UK, yes, not the case globally (much higher for some countries, much much lower for others)

OldMusicGuy

RD42 wrote: »

Hi Triumph13, thanks for the feedback. My portfolio is self created, based mainly on a few years worth of subscription to Moneyweek magazine. My platforms "x-ray" analysis gave the breakdown I listed.

I am approaching retirement and a couple of years ago through I had better start learning how to plan to manage my pot into retirement, and also get an insight on where the markets were headed. So I subscribed to MoneyWeek and found it worse than useless IMO. Just a few share tips and a lot of of opinion pieces (usually along the lines of "the sky is falling") but nothing that really helped me. I cancelled my subscription last year and a few months ago found this place. I have learned more from reading a lot of material on here than for free I got in nearly two years of subscribing to MoneyWeek.

If you haven't read this thread, it is a great place to start: https://forums.moneysavingexpert.com/discussion/comment/70696748#Comment_70696748

RD42 wrote: »

Hi (Another Joe) - essentially I can no longer stand my job so need to reduce contributions. I am relatively highly paid, but its been making me sick with anxiety and depression for years, I wake up every weekday loathing the thought of the day ahead, and weekends are not much better. As a family we recently moved to a cheaper area of the country, leaving us mortgage free, so I plan to get a much less stressful job.

No point saving up a pension if I top myself before getting the chance to enjoy it, or have a reduced life expectancy

I am in a similar position (although a lot older and closer to retirement than you). So I sympathise and you are doing the right thing. You should read the blogs by the Escape Artist (https://theescapeartist.me/) and Mr Money Mustache (http://www.mrmoneymustache.com/) if you have not done so already. They will help you understand why you are doing the right thing and also confirm that like the other posters said, you should consider investing in diversified tracker funds as part of your long term strategy.

Best of luck!

SouthLondonUser

You seem to have forgotten about inflation. £600k in 15-20 years will have a lower purchasing power than £600k today. If you want to get a feeling for the purchasing power of your pension pot, then you should consider how much your SIPP can yield above inflation.

How do you hold international and UK shares? Directly or through some funds? ETFs tracking broad indices have total expense ratios starting from 7bps (= 0.07%) per annum, which is considerably lower than any fund. Over time, the difference adds up substantially.

The formula to calculate the difference is:

(1-c1)^t / (1-c2)^t - 1

For example, if fund1 charges 0.30% and fund2 charges 1%, after 20 years fund1 will be > fund2 by 15.13% . Note the result does not depend on the gross yield of the underlying.

edinburgher

OP hasn't necessarily forgotten about inflation - it's quite common for people to discuss expected real returns (i.e. after inflation) on this forum and others.

Alan_Brown

RD42 wrote: »

Hi (Another Joe) - essentially I can no longer stand my job so need to reduce contributions. I am relatively highly paid, but its been making me sick with anxiety and depression for years, I wake up every weekday loathing the thought of the day ahead, and weekends are not much better. As a family we recently moved to a cheaper area of the country, leaving us mortgage free, so I plan to get a much less stressful job.

No point saving up a pension if I top myself before getting the chance to enjoy it, or have a reduced life expectancy

Wow, this is exactly how I feel at the moment!

Good luck with your plans.

RD42

Thanks Alan - Hope you feel better soon.

RD42

Hi All,

Thanks for the valuable input so far. I am considering restructuring to this portfolio:

Vanguard Target Retirement 2045 36.00%
Vanguard Lifestrategy (100% Equity) 10.00%
CF Woodford Equity Income Class Z - Accumulation (GBP) 5.00%
Legal & General European Index Class C - Accumulation (GBP) *10 5.00%
Vanguard FTSE Developed Europe ex-UK Equity Index Accumulation (GBP) 4.00%
Vanguard FTSE Developed World ex-UK Equity Index Accumulation (GBP) 4.00%
UK FTSE 100 tracker 4.00%
Legal & General US Index Class C - Accumulation (GBP) *10 3.00%
UK FTSE 250 tracker 3.00%
BlackRock Japan Equity Tracker Class H - Accumulation (GBP) 2.00%
Jupiter China Class I - Accumulation (GBP) 2.00%
Jupiter India Class X - Accumulation (GBP) 2.00%
Cash 6.00%
Gold (ETF) 4.00%
Silver (EFT) 2.00%
Gold & Silver (Central Fund of Canada) 2.00%
Individual Shares - High growth / Risk (Tesla, Equinix) 6.00%

Any thoughts welcome (Is it still too many? Is too much with Vanguard?), thank you all.

Wirenth

For me, that still looks like a lot of different funds with plenty to be lost in the effort to rebalance. Take a look at this for an idea of a simple portfolio:

http://monevator.com/the-slow-and-steady-passive-portfolio-update-q1-2017/

SouthLondonUser

How much would you pay in annual charges, for each fund and on the portfolio as a whole?
You could probably track very similar indices with ETFs, but at much lower costs.