SIPP for gap between 55 and DB @63

Workerbee999

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Linton

I think you should split up the money. If you arrange to have say 3 years in cash on retirement, the following 3 years in cautious investments, and 2 years or more in 100% equity you will end up with an allocation that matches your requirements rather than a risk level chosen just because it feels right.


You could fill the 100% equity tranche now, then start the cautious funds, finishing off with cash savings. Once you start withdrawing the money you can rebalance the allocations keeping sufficient in cash and cautious investments to cover any market crash in the subsequent reducing number of years.

Dox

The strategy depends heavily on your attitude to risk - and only you and your OH know how you feel. Which risk matters more: not meeting your 'target' in terms of cash in the pot, or the possibility of taking a big enough investment risk to hit the target but losing heavily if the market crashes....or investing in 'safe' funds with little prospect of serious growth.

Once you've worked out which risks are the most tolerable, that should give you a clear way forward as to how you actually invest.

Hope it works out for you.

frugal90

we have a similar strategy which is in action now. I will take my £80K sipp which is 100% in cash over the next three years before my DB pension kicks in at 60. My wife is just 50 and has at the moment £86K in a sipp which is fully invested in equities. She will take her DB pension also at 60. We plan on moving my wife's sipp to cash over the next 4 years but will be able to use my lump sum to soften any crisis situation. Good strategy I think to cover the gap. I am not a fan of the conservative party but Mr Osborne did me a favour! We also have too much cash at the moment which we need to move to income paying IT's.

kidmugsy

frugal90 wrote: »

We also have too much cash at the moment which we need to move to income paying IT's.

Sometimes Cash is King. And one doesn't always know in advance.


I notice that King Warren of Buffet has given up investing in new companies at the moment - he's just spent a large sum of his company's money on buying back its own shares. Maybe he thinks Berkshire Hathaway is the only sure-thing investment among the sorts of businesses he understands.

The lesson is presumably either (i) get out of US equities, or (ii) get out of US equities except Berkshire Hathaway plus the sorts of businesses he doesn't understand; and (iii) perhaps invest in equities in the countries that don't appeal to him because he doesn't understand them and their ways.

That latter might include the UK; he blundered by investing in Tesco after all.

His glory days are long behind him but that might simply be because his firm is now so huge - there's no sign that his skills have deserted him, is there?

Audaxer

In view of the recent long bull run, I am assuming we are due an equity crash soon, so I would put any growth estimates on the very low side for the next 6 to 10 years no matter what you invest in. Even cautious investments of say 40% equities will fall in an equity crash, just to a lesser extent, but will probably take the same time to recover their capital value as higher risk investments. However if you are investing in the SIPP just to get the benefit of the tax relief and withdraw it all within the personal allowance over 8 years, could you not just effectively 'move' £12.5k of the investments out of the SIPP each year and reinvest them in an S&S ISA? If I have misunderstood and you need to withdraw the cash to live on, that is a different matter, but if you can afford to keep it all invested with a view to drawing an income later on, I think you could still get the benefit of the tax relief that way.

kidmugsy

Workerbee999 wrote: »

By the time we get to 55 this amount of money annually is part of the plan we will need to live on .... In terms of risk, I would say OH is quite low .... but I am medium

Consider putting some of the money into an ETF of TIPS i.e. the US equivalent of index-linked gilts. They pay much more than ILGs because the price of the latter has been elevated by the need for pension funds to buy lots of them to offset their liabilities for index-linked pensions.

Workerbee999

Please can you give me an example of what an ETF of TIPS is so that I can read up on it?

Audaxer

Workerbee999 wrote: »

I think my goal would be try to match inflation so as to not lose value in real terms - assuming too that the personal allowance increases with inflation - but is it realistic to match inflation with a low to medium risk tolerance?

I think in the long term, over the course of retirement it is realistic, but who knows over the next 10 years. If the sequence of investment returns is poor in the first decade of retirement that can be really bad news as to how long a portfolio will last before you run out of money. If you google 'sequence of returns' you can see some quite interesting comparisons between good and bad sequences early on in retirement.

Also, do any of you have opinions of the HSBC Global strategy funds?

I think if going for more than one multi asset fund, HSBC Global Strategy Balanced fund is a good medium risk fund to sit alongside Vanguard LifeStrategy 60, as it has similar returns but a lot less UK equity and a bit of property.

Also to help reduce the tax liability, it might be worth your OH considering taking a tax free lump sum from his DB pension when he takes it, especially if it has a good commutation factor.

kidmugsy

Workerbee999 wrote: »

Please can you give me an example of what an ETF of TIPS is so that I can read up on it?

https://www.hl.co.uk/shares/exchange-traded-funds-etfs/list-of-etfs?etf_search_input=TIPS&x=31&y=13&companyid=&sectorid=&tab=prices

Thrugelmir

Markets are unlikely to remain placid as they have been for the past decade. Statistically there's a 1 in 6 possibility of markets falling by 10% in a year. Your planning needs to include a contingency allowance for the unexpected. All you really can do is to to save until you reach your objective. With a relatively short window there's no certainty as to what investment returns will be. Even allowing for the reinvestment of income generated.