Moving Stakeholder monies over to a Sipp investment

seb2020

I am in my mid-sixties and hold a Stakeholder Pension with approx. £120K.

At some point either now or within the next 5 years (I am in no immediate hurry) I would like to move the monies out of the Stakeholder pension into a Sipp because the Stakeholder pension does not offer drawdown or annuities; it is just a pension’s savings vehicle so to speak.

I plan to move all of my Stakeholder money into a Sipp investment such as one of the Vanguard Life Strategy Funds (VLS Fund) because I want to keep things straight forward and simple. What concerns me is putting the all the £120K into the Life Strategy Fund (or whichever fund I choose) in one go. If I had saved into a Sipp years ago I would have fed the Sipp investment on a monthly basis.

My questions to those who are knowledgeable about these matters are:-

1/ What are your constructive views on putting the £120K straight into the VLS fund all in one go; do you think it is going to create a problem at some point or not at all?

2/ I could hold the money in a cash account within the Sipp and say move £10K per month into my chosen VLS Fund over the next 12 months – Do you think that this would be a better approach than just depositing the £120k straight into the VLS fund?

3/ I believe a straight forward Sipp portfolio comprising of one VLS Fund will probably be sufficient for my needs but is there another tracker fund that I could consider which would complement the possible VLS 60 that I am considering? The aim of the Sipp will be to go into UFPLS (probably after about 5 years) and take approx. 3% every other year for a holiday and hopefully there will be some money left in the Sipp for me to leave my two children when I have passed on.

Thanks in advance for any well-meaning constructive views and comments.

Albermarle

What concerns me is putting the all the £120K into the Life Strategy Fund (or whichever fund I choose) in one go

This is not really an issue, as the money is currently invested in your stakeholder pension. You are not taking cash and investing it from scratch.
The only time it could be something to think about is if the current investment in the stakeholder is a lot different from VLS 60 , meaning more/less risky .
Vanguard funds is quite UK focused and the 60% equities is rigid I think. Similar funds like Blackrock Consensus; Fidelity Multi Allocator etc give themselves a bit more leeway on the exact equity % . So it could be argues that having more than one is sensible although the returns are very similar.

SonOf

What concerns me is putting the all the £120K into the Life Strategy Fund (or whichever fund I choose) in one go.

Why? you fail to give your reason.

1/ What are your constructive views on putting the £120K straight into the VLS fund all in one go; do you think it is going to create a problem at some point or not at all?

No problem.

2/ I could hold the money in a cash account within the Sipp and say move £10K per month into my chosen VLS Fund over the next 12 months – Do you think that this would be a better approach than just depositing the £120k straight into the VLS fund?

Statistically, that will give a lower return in most periods. It also suggests you are trying to time the market a bit as you are currently invested wtih the stakeholder pension. Then coming out for x months only to go back in again in a similar area to where you are now.

3/ I believe a straight forward Sipp portfolio comprising of one VLS Fund will probably be sufficient for my needs but is there another tracker fund that I could consider which would complement the possible VLS 60 that I am considering?

VLS is a not a tracker fund. It is a fettered fund of funds that uses own-brand tracker funds as the underlying investments.

Do you have the knowledge and experience to make your own investment portfolio and manage it ongoing?
- if not, then why would you attempt to do so?

There are other multi-asset funds that may be better for you than VLS. There a now a good number that are a variation of a theme but VLS is no longer the cheapest and for many, that is all they are looking for in a low cost multi-asset fund.

seb2020

This is not really an issue, as the money is currently invested in your stakeholder pension. You are not taking cash and investing it from scratch.

Thank you for your response Albermarle.

Just to clarify that I would be moving the cash from my Stakeholder Pension directly into a Sipp when the time comes. The Sipp would be with another provider and I would not be able to move the Stakeholder investments over directly just the cash so in effect it would be starting the Sipp from scratch.

jaybeetoo

seb2020 wrote: »

Just to clarify that I would be moving the cash from my Stakeholder Pension directly into a Sipp when the time comes.

You are currently invested. You would only be in cash for a very short period of time before investing. You are effectively moving from investments to investments with (hopefully) a very short period out of the market.

Ask you current provider how long they take to do a transfer.

AnotherJoe

As said above, your idea fails to take account of the fact you are currently fully invested and you'd end up fully invested with a short hiatus as you transfer. Its not the same as starting from scratch. Its one thing investing a bit at a time when you can only do that. Once you are fully invested then deciding to change shouldnt be a reason to put it in cash and then trickle it back in again. Theres nothing magical about doing that.
Instead consider more carefully what you will invest in, you have plenty of time,

seb2020

Thank you for your responses which are helpful.

Vanguard funds is quite UK focused and the 60% equities is rigid I think. Similar funds like Blackrock Consensus; Fidelity Multi Allocator etc give themselves a bit more leeway on the exact equity % . So it could be argues that having more than one is sensible although the returns are very similar.

Could I just as an example invest 40% or 50% into Blackrock Consensus and the balance into the VL60 (or similar). Would I need to re-balance if I included the Blackrock Consensus?

bowlhead99

seb2020 wrote: »

Could I just as an example invest 40% or 50% into Blackrock Consensus and the balance into the VL60 (or similar). Would I need to re-balance if I included the Blackrock Consensus?

You can put whatever portion you like into whatever funds you like. Each fund will have a different level of performance from year to year. Sometimes one doing better and sometimes the other.

It may be that over time, one gradually performs relatively better than the other so that your holdings diverge from your initial (e.g.) 50:50 Blackrock/Vanguard split to something different, like 54:46 or 60:40 or whatever. What you are asking is, do you actually need to rebalance at that point, to get back to 50:50?

Well, if you think 54:46 or 60:40 is a portfolio that no longer meets your needs, and 50:50 would meet your needs better, then you could sell some of the larger one to top up the smaller one. However, if both funds have a similar level of risk and use similar types of assets to meet your objective in a slightly different way, and it was only arbitrary that you picked 50:50 rather than 60:40 or 100:0 in the first place - or 33:33:33 with another fund in the mix - then really there is no specific need to try to bring the allocation back to 50:50, because 50:50 is not a better portfolio, it is just a different arbitrary point between 100:0 and 0:100 which you initially chose for convenience.

If you were building a portfolio from different building blocks, and had decided you would hold 60% equity, 30% bonds, 10% commercial property, but over time you ended up with 70% equity, 16% bonds, 14% commercial property - then yes you should probably rebalance your allocation to move closer to your original plan (if that plan is still appropriate for you) because if you don't, your portfolio will probably be more risky / volatile than you had originally intended.

However if you decide to have Blackrock and Vanguard each build part of your portfolio using a mixed asset solution with medium-ish risk... then it doesn't matter if your 50:50 mix of 'medium-ish risk' to 'medium-ish risk' gradually diverges over time and becomes a 55:45 mix of 'medium-ish risk' to 'medium-ish risk'.

If the performances of the two funds did diverge significantly over a long period of time it might lead you to question whether they two funds were really taking comparable risks and doing what you had expected each of them to do, which might lead you to consider which of them you preferred or whether you would be happy to keep some mix of both.