Fund for preservation.

Max1970

Hi all. First time post. I currently have an Sipp and am approaching my target figure. I am planning to retire in 7 years and keeping what I’ve got is more important than growth (although a little bit of growth would be nice).

Was considering switching from mainly equity based index funds and was looking at Baillie Gifford Diversified Growth but haven’t made a firm decision and would appreciate any suggestions.

Thanks

ermine

Max1970 wrote: »

Was considering switching from mainly equity based index funds and was looking at Baillie Gifford Diversified Growth

You need to understand what you are trying to do and why. It's not unreasonable to gradually derisk your pension savings by shifting a higher proportion of them to bonds, but that depends on how big the fund is, whether you will part of invested etc etc. It was more important to lifestyle your pension when you would be buying an annuity with it, but that hasn't been the general case since 2016


Monevator is good, you can get help with your pension choices if you are over 55 from Pension Wise which is government funded


There's not necessarily anything worn with the BG fund you cited, but you haven't given enough indication of your position or risk tolerance and other sources of income for anybody to be able to say anything.

Dox

How are you planning to take your retirement benefits - cash, drawdown, annuity...?

Max1970

Thanks for replies. I!!!8217;ll give some more info. I!!!8217;m 47. I have 215k in Sipp and approx 70k in isas. I am widowed and am planning on selling my property (no mortgage) around the time of retirement and buying something more modest which, at today!!!8217;s valuations, should realise around 120k.

My attitude to risk used to be quite cavalier but I feel I want to hold on to what I have gained and don!!!8217;t feel confident being almost fully invested in equity based funds.

I won!!!8217;t be taking an annuity and will use drawdown without taking 25% lump sum.

kidmugsy

Have a look at the reviews and reports of Personal Assets Trust and Ruffer Investment Company. Then ask yourself whether you might prefer to buy their shares or just copy their strategies.

BLB53

I guess its a case of settling on an asset mix which meshes with your tolerance for volatility/risk and then selecting a fund to match. I like the BG philosophy and hold some of their investments such as their managed fund and also Scottish Mortgage. I also have the Vanguard Lifestrategy funds which would be worth a look.

One word of caution would be not to go too defensive as although you may only have 7 yrs to retirement, the funds will be invested for considerably longer so select accordingly.

tacpot12

You really need quite a bit of growth in retirement. You need your assets to grow at the rate of inflation PLUS the rate at which you are selling them (or at which they produce an income). My own view is that if your life expectancy is less than 10-15 years, you should take a cautious approach, but otherwise, you really need to be invested mainly in equities, otherwise you will be very short of money to live on.

If the ISAs you have are cash ISAs, this gives a very comfortale cushion against market fluctuations. In bad years, draw on the ISAs, in good years, draw on the equity funds in your SIPP. Generally markets seem to have two bad years for every 5-7 good years.

Ultimately, you need to go with your instinct, or pay a professional to manage your portfolio. If your instinct is that you would not be comfortable being heavily invested in equities, then now is a reasonable time to adopt a defensive approach; what with Brexit on the way.

If I were you, I would continue to research and reflect on what is the right answer for you. Now that we all have to take responsibility for creating and managing our own pensions, it can be nerve-wracking and I am not surprised that many/most people want to take a less risky path.

jamesd

Max1970 wrote: »

I won!!!8217;t be taking an annuity and will use drawdown without taking 25% lump sum.

Not taking a tax free lump sum would be a serious mistake, causing you to pay income tax on a quarter of the money on the way out when you don't have to. Why on earth do you want choose to pay income tax unnecessarily? It's so strange that it pretty much has to be due to you misunderstanding something.


Do you know that you can take benefits from only part of your pot at a time if you like, taking 25% of each portion tax free? You don't have to take 25% of it all at the beginning.

You can do very tax efficient things like taking enough out tax free to use your ISA allowance and taking out only part of the remaining taxable amount, leaving the rest for later, if you like.

So for example, this sort of thing is entirely fine:

1. start with 215k
2. take benefits from 80k of it. 25% tax free lump sum taken and used to fund ISA. Remaining 60k placed into drawdown account from which you take 11850 of taxable money with no tax to pay as it's your personal allowance (assuming no other taxable income, or only zero tax interest).
3. After 2 you have: taken out 31850 paying no income tax on it; have 60000 - 11850 = 48150 in the drawdown account from which all withdrawals are taxable; still have 135000 uncrystallised (no benefits taken yet) from which you can take 25% of any portion tax free whenever you like.

Perhaps you just didn't know that you have that degree of total freedom on when you take bits out?

Alibert

If you are 47 then (unless there is some health issue you haven't mentioned ) I would think you need to be planning to live another 40 years.

So in my mind a low growth low risk conservation plan is crazy! Just to keep on top of inflation is hard enough , and you have to generate enough to provide forty years of income

Max1970

Thanks to all for your help. I think I!!!8217;ve been barking up the wrong tree a bit by looking to conserve my cash.

James D, I worded my second post badly. When I said I wasn!!!8217;t taking 25% lump sum, I meant I wasn!!!8217;t planning on taking it all at the beginning but the way you have explained it sounds a great way to get the most cash tax free. Thanks.

OldMusicGuy

You need to do some serious financial planning for what will happen when you retire. For example, what will your SP be, and when will you get it? That will impact your financial needs. Also, when you sell your property, what will you do with the equity you realise? Will you get any other pensions, eg from DB schemes? How much will you be spending?

Once you do this, you may find you do not need significant growth in your investments. I certainly do not, which means I have moved some of my investments to lower equity ratio funds (like the more conservative VLS funds) and I am holding a lot of cash and fixed interest savings bonds. That means I am preserving what I have made so far and am protecting against downside risk, but am definitely giving up growth opportunities. But that suits me and I have just retired.

What you should not do is start switching funds/investments based on a vague notion and some random input from people on the internet. It's certainly good to get input from this forum, but do your research and define some clear objectives before you start switching investments around.

FYI I am not taking my tax free cash upfront because I don't need to and would be wasting it. I will initially be taking UFPLS withdrawals until my SP kicks in. If you mean you are taking UFPLS withdrawals then you are using your 25% tax free, but only gradually.