Transfer to SIPP sanity check, VLS80 etc

Matt002

Evening chaps. After many years of procrastination I am about to pull the trigger on moving my pension away from Reassure and over to a SIPP.

I have, I think, done my due dil and chosen the best platform for me which has the lowest fees for what I want to do. I have read about many different funds and written the odd bit of software to perform some analysis etc.

So I have
* my platform set up
* forms completed to transfer in my 110k personal pension in
* forms completed for a regular DD for my salary sacrifice.

The existing pension is in a Reassure FTSE all share tracker with 1% AMC which I have lazily and stupidly not sorted out. My plan is to purchase VLS80 once the transfer is complete.

I have now had a sudden panic that I'm at a bad place on the Dunning Kruger curve and am about to screw up through lack of knowledge...

Two things come to mind
1. Am I correct to assume that a FTSE all share tracker is 100% UK equities which is a higher risk than the 80% global equities (mainly UK and US) in VLS80?
2. When making large purchases, would it be sensible to buy 110k of VLS80 in one chunk or would it be better to spread out the purchases to say one 27.5k purchase every month for 4 months to flatten any fluctuations in purchase price?
3. Any benefit in keeping a chunk in a cheap L & G FTSE tracker or some other fund too? I don't really know how I would define benefit!

I'm 38, mortgage is completed and planning on retiring at 60 or so. Just about to up the pension contributions to £1500 per month.

Hopefully this is not a case where my incompetence knows no bounds. :beer:

pip895

On average phasing your investments in isn't recommended - you just loose out on growth. You are already fully invested - the VLS80 is a lower risk fund - I would just invest in one chunk.

If you want to add other funds on the side I wouldn't go for a FTSE tracker personally as that area is already covered in the VLS80. I might consider a UK small companies fund for a small portion or maybe a property fund as a more cautious option.

bigadaj

Just wondering about the direct debit for the salary sacrifice, how does that work?

Matt002

I filled out the employer regular contribution section in this form with the details of how much my employer puts in a month:
https://www.tddirectinvesting.co.uk/dam/jcr:0c8d9af8-5710-4ab0-b601-9b84579cfac1/Contribution%20form.pdf

Then my employer filled out the DD application on the last page and thats about it.

EdSwippet

Matt002 wrote: »

Two things come to mind

Um... three things, surely?!

Matt002 wrote: »

1. Am I correct to assume that a FTSE all share tracker is 100% UK equities which is a higher risk than the 80% global equities (mainly UK and US) in VLS80?

By and large, yes.

By moving from FTSE all-share alone to global markets you increase your diversification, which lowers risk (defined broadly as your exposure to losses). By adding a few bonds/gilts you also blend in some assets that have a historically somewhat low-ish correlation to equities.

Matt002 wrote: »

2. When making large purchases, would it be sensible to buy 110k of VLS80 in one chunk or would it be better to spread out the purchases to say one 27.5k purchase every month for 4 months to flatten any fluctuations in purchase price?

Given that you are already fully invested in the FTSE all-share, it probably makes sense to move in one go.

Averaging over a period is a reasonable idea if you are making a large change in asset class, say from cash into equities. But when moving from one lot of equities into (mostly) another, staggering the transition probably won't gain you much, whereas sitting in cash for a few months might cost you in missed gains.

Matt002 wrote: »

3. Any benefit in keeping a chunk in a cheap L & G FTSE tracker or some other fund too? I don't really know how I would define benefit!

None that I can see. VLS funds are designed to be single-fund portfolios. Once you start blending things with them it's hard to stick to a balanced plan. Best either use one VLS, or split everything into a range of separate funds to cover your selected asset classes.

Matt002 wrote: »

Hopefully this is not a case where my incompetence knows no bounds.

Doesn't look like it to me. Your transition plan seems fine. If it were mine I could certainly live with it.

Matt002

I can't even count to three, that wasnt a good start was it?

Thanks for the detailed post, very useful.

One thing I don't get with Interactive Investors new fees, its 10 quid to buy 100k of a fund and 40 quid to buy over 100k. So for 110k why wouldnt you just do 2 purchases at 55k one after the other? What am I missing?

I did also look at hsbc gobal strategy balanced, blackrock consensus 85, l & g multi index 6 but I kept getting drawn back to vanguard lifestrategy 80. I don't really know why.

I do also have 5k in vls80 with an iweb ISA, I am kinda itching to learn a bit more and perhaps see what else I should be looking at.

EdSwippet

Matt002 wrote: »

One thing I don't get with Interactive Investors new fees, its 10 quid to buy 100k of a fund and 40 quid to buy over 100k. So for 110k why wouldnt you just do 2 purchases at 55k one after the other? What am I missing?

I don't think anyone quite 'gets it' yet either. This whole charging scheme is new at Interactive Investor, so nobody has any real-world experience of how it operates. If it does indeed run as it appears, then clearly doing two smaller trades is an obvious workround.

Perhaps they'll do something obstructive to frustrate this. Limit trades in a single fund to one per day (in which case, do them on consecutive days!) or similar. For now, though, I wouldn't let that change your decision. Even if you have to pay £30 over the odds on the transfer, that's a one-off cost that will pale in comparison to the £650-ish and upwards that you will save annually in charges.

Matt002 wrote: »

I did also look at hsbc gobal strategy balanced, blackrock consensus 85, l & g multi index 6 but I kept getting drawn back to vanguard lifestrategy 80. I don't really know why.

VLS has a somewhat high-ish UK bias that doesn't appeal to everyone. However, the bulk of the UK market is the FTSE 100 and that is dominated by international companies, so the performance of UK equities is not actually as tightly tied to the performance of the UK economy as a whole as one might imagine.

So yes, you could pick something else that would probably work just as well over the long term. The key here is to find something that suffices, rather than search continually for an elusive (and likely illusory) optimum. VLS fits the bill.

Matt002 wrote: »

I do also have 5k in vls80 with an iweb ISA, I am kinda itching to learn a bit more and perhaps see what else I should be looking at.

Ah, an itch to do something! Best not acted on in my experience.

Again, sufficing is the key. Stick to the plan, set everything up as simply and as cheaply as possible, and then let time do its thing. The more you fiddle, the more likely you are to either mess something up or find yourself chasing something that never materialises (or perhaps materialises right where you just moved away from!). More complex in no way guarantees more successful. And quite often it's the opposite.

Matt002

Cheers, I think my only other concern is FSCS cover which may have tempted me to split 36k in to each of vls80, blackrock consensus 85, hsbc global strategy dynamic. Thoughts?

Point taken about tinkering with things too much.

EdSwippet

Matt002 wrote: »

Cheers, I think my only other concern is FSCS cover which may have tempted me to split 36k in to each of vls80, blackrock consensus 85, hsbc global strategy dynamic. Thoughts?

I've never let this worry me, and I hold a fair bit over the FSCS limit in several Vanguard, HSBC, and Blackrock funds.

By regulation, the platform has to keep client holdings and its own separate, so if that fails you don't lose. And the unit trusts and OEICs similarly have to use a trustee and registrars to hold and manage the actual assets in the unit trust/OEIC. And each fund is itself a separate company so that even if the parent company folds you still have the underlying assets (and some other asset manager company will generally simply take over).

The main use FSCS protection seems to have is where the platform or fund manager is in fact just a front for a bunch of Nigerian money launderers or some other Bernie Madoff type scenario, or -- slightly more likely -- just ignores every UK regulation in its operations. Not impossible I suppose, but sufficiently improbable that I don't worry about it. Especially when sticking to completely mainstream reputable UK platforms and fund/OEIC providers.

If this is something that would worry you though, then by all means split up your holding, and perhaps also use more than one platform. Personally, I don't bother. Not even close.

Matt002

Thanks, I shall ponder on that and see where it gets me...

Another question relating to the transfer, I assume Reassure will sell the funds I have with them and then the transfer will be done in "cash"? I can't really see any other way it could work but I thought I had best check!

In terms of other finances I have 36k in a cash ISA and 18k in 5% current acounts / santander current. My gut feel is to have 40k of cash I can get to and to put the rest into the S + S ISA. Does that sound a sensible balance?

Alexland

Yes you would complete the transfer paperwork saying you want to transfer the full value as cash if you then wanted to choose your funds on a DIY platform. You would be out the market until it completes and you invest again.

£40k cash sounds high for a rainy day fund. I try to keep it as low as I can get in 5% regular savers knowing I am likely to have access to credit or a redundancy package in the worst case before I would need to access lower risk ISA investments. But then our monthly outgoings are low with a mostly repaid mortgage and recent cars with no finance, etc

Unlike EdSwippet I do worry about losses that could occur from fraud and value some extra FSCS protection so I have split our investments across platforms and fund managers to control risk. Still over the limit on some accounts but the potential losses would be painful but manageable. Probably costs us around £200 a year more in fees each year but that's our choice and overall our fees are still very low.

Alex