Approach to SIPPs

darkidoe

AnotherJoe wrote: »

I have two SIPPs and an ISA plus for historic reasons a few fund and share accounts with investments that are somewhat stuck due to CGT so I'm burning them down within the limit each year.
I have very different strategies in those three. Initially for historic reasons and now, because its simpler to manage this way.
SIPP1, four trackers comprising three* global tracker funds one property. 90% equities 10% property. My "passive portfolio"
SIPP2, a mish mash of active pooled investments and a few shares all intended to be held for the fairly long term. My "active portfolio"
ISA, a failed** experiment at high dividend paying investments, gradually being migrated to longer term holds mostly ETFs and shares. Just bought some so-called "alternative energy" (mostly solar and wind) investments there though in a few years I think coal gas and oil will be the alternative and these will be mainstream and that's why I'm getting into these now (and arguably shoudl have done a year or two ago but whatever)


* three because it was meant to be two, but for one of the two i was stuck between two choices and was getting analysis paralysis so just went 50/50 in both. Their performance has been almost identical.

** failed because though the dividends have been good I dont like seeing the capital decline and overall its done worse than both SIPPs.

I am curious if you are still happy with your active SIPP portfolio compared to the passive SIPP portfolio and if you do compare their performance side to side.

I suppose the relevance of decumulation doesn't matter so much at the moment and inheritance issues are not that relevant at the moment but I wonder if people orientate their investments with these points in mind. For instance, I might prefer risker/volatile assets in SIPPS compared to ISA if I am planning to draw on ISA in early retirement. Perhaps this doesn't matter so much but I wonder if people do look back when they are in decumulation mode to think if only they planned certain assets in various tax wrappers to make life easier for themselves. I haven't got my head quite round that idea to think that way yet.

cloud_dog

darkidoe wrote: »

I suppose the relevance of decumulation doesn't matter so much at the moment and inheritance issues are not that relevant at the moment but I wonder if people orientate their investments with these points in mind. For instance, I might prefer risker/volatile assets in SIPPS compared to ISA if I am planning to draw on ISA in early retirement. Perhaps this doesn't matter so much but I wonder if people do look back when they are in decumulation mode to think if only they planned certain assets in various tax wrappers to make life easier for themselves. I haven't got my head quite round that idea to think that way yet.

I'm not that near to retirement (just yet) but I am edging towards my safer (less volatile) investments being within the OH SIPP and more volatile investments within the ISAs.

I have an additional consideration, in that at age 65 my DB scheme kicks in which will be approx 75% of our identified required retirement income. My SP kicks in at 67 and the OH at 68. With SP our income requirements will be more than fully met by guaranteed income sources (DB / SPs), and I am wondering if I really need to concern myself with a more, possibly, traditional balanced investment approach for retires who are funding themselves via a higher proportion of investment based income?

(I'm ignoring the fact that my OH has a very, very low risk appetite. If she could it would all be in a savings accounts. I've even gone to the effort of putting a powerpoint presentation together to help her visualise the options and the impact of inflation and the fact that it is not just about the position at retirement but also the following 10, 20, 30 years. Being a typical man, I haven't, ahem, found the opportunity to talk her through it just yet.)

Thrugelmir

Mr.Saver wrote: »

I bet any DB pension for a person who worked for 40 years would beat that £6,000 per year retirement income.

I bet that some in a DB scheme earning that level of salary is paying a much higher employees contribution rate than the bare minimum prescribed by auto enrollment though.

Alexland

cloud_dog wrote: »

I've even gone to the effort of putting a powerpoint presentation together to help her visualise the options

It's been over 10 years since I delivered powerpoint slides to my wife and then she avoided me for about 6 months so good luck if you go ahead.

Our SIPPs are low cost passive global equity funds and ETFs on fixed or capped price platforms. We occasionally transfer lump sums across from our workplace salary sacrifice DC pensions where we keep our bond allocations.

Alex

AnotherJoe

darkidoe wrote: »

I am curious if you are still happy with your active SIPP portfolio compared to the passive SIPP portfolio and if you do compare their performance side to side.

I did start to do it yearly. I did post it here end of last year but can't recall what it was an it's only really relevant after such a time it's academic not having a time machine. It's also getting difficult to compare as I am doing drawdown from the active, so first I have to account for that and second there's a cash float in the active which makes it an awkward comparison since its not 100% equities.

darkidoe wrote: »

I suppose the relevance of decumulation doesn't matter so much at the moment and inheritance issues are not that relevant at the moment but I wonder if people orientate their investments with these points in mind.

Not yet. I could see me doing it but on the other hand I might just burn down investments starting with the least favoured. . At the moment I'm in the privileged position its growing faster than I'm spending

AnotherJoe

p.s. OK I had spare time to calculate it.
So, since 1 Oct 2017 baseline to date



SIPP2 Active MishMash 13% (nightmare calculating this as its had withdrawals and additions)

SIPP1 Passive Global 16%


All mgmt fees included
MishMash with HL
Passive with SL

Albermarle

SIPP2 Active MishMash 13%

SIPP1 Passive Global 16%

Interesting comparison. I have been reading some threads and other info on the great 'passive vs active ' debate and there is also a school of thought to hedge your bets . ie. a passive low cost baseline and with some active funds/IT's as extra. Apparently it is what a lot of IFA's recommend for their clients portfolios and approx what you are doing,
Do you think in more adverse market conditions the active SIPP would lose less than the passive one ?

Prism

Albermarle wrote: »

Do you think in more adverse market conditions the active SIPP would lose less than the passive one ?

That will depend very much on the active fund. Towards the end of last year for example my growth active funds (SMT, Merian UK Mid cap etc) fell around 20% which was much worse than their index. My more defensive active fund (Fundsmith) held up well against the index. My generally worse performing active fund (FEET), went up not down.

A number of popular active funds are mutli asset which are designed to cope with these events even better

aroominyork

Going back to SIPP contribution limits and tax, can I please check I understand this.

1) Each year you can pay in the amount of your gross salary up to a maximum of £40,000. This includes employee’s and employer’s payments into a workplace defined contribution scheme.
2) It is calculated gross so if you are a basic rate taxpayer you can pay in a max of £32,000. If you are a higher rate taxpayer you can still pay in £32,000 but as well as this being grossed up to £40,000 you can reclaim £8,000.
3) SIPP contributions can be grossed up with tax you have not paid, eg if you earn £40,000 with a personal allowance of £12,500, you pay 20% tax on £27,500 = £5,500. However you can pay £32,000 into a SIPP and it is grossed up by £8000 to £40,000.
4) You can make contributions going back three tax years using the earliest year first, so after maxing out my gross salary or £40,000 (whichever is the lower) for 2019/20, I can use up any unused allowance for 2016/17, then 2017/18, then 2018/19.

Is this correct please?

AnotherJoe

Albermarle wrote: »

Interesting comparison. I have been reading some threads and other info on the great 'passive vs active ' debate and there is also a school of thought to hedge your bets . ie. a passive low cost baseline and with some active funds/IT's as extra. Apparently it is what a lot of IFA's recommend for their clients portfolios and approx what you are doing,
Do you think in more adverse market conditions the active SIPP would lose less than the passive one ?

I think you cannot make any useful deduction at all !

"active" means that someone is making ongoing decisions what to buy sell and hold. Whereas passive generally means just staying as you were. So, it would depend what they bought, sold and held and those of course could be very different for different active strategies!
Theres no such thing as just one "active" fund management style. And that difference is there whether in terms of rising market or falling, it doesn't matter if its "adverse" market conditions*.

Some of the (apparently) cleverest people have tried numerous strategies for being active, one of the cleverest was some guys who won the Nobel Prize for economics. Their hedge fund was one of the biggest bankruptcies ever (LTCM).

There are also very different active strategies. Some might be, find companies you think might be good for the long term, buy those and hold them. Terry Smith and Warren Buffet do that. Those are "sort" of active funds, but perhaps more "passive active". Whereas others are active active eg will be trading in and out constantly. "true" passive would be, buy the global market and do nothing else.
I did once look retrospectively at one of Warren Buffets biggest bets, Coca Cola. AFAICR if I'd just bought that instead, at the same time I started trading, and reinvested dividends, I'd have done much better than in all my different trading.Of course, starting from now, the trick is to know whats the Coca Cola for the next 30 years? Maybe its Coca Cola, or maybe its something else entirely.



* if thats code for "falling markets"