Seeking Advice on HL SIPP allocations

jellydream

Hello everyone, I would be grateful to the clever people on this board for any advice and ideas on how best to allocate a largish cash sum within a Hargreaves Lansdown SIPP wrapper.

Background to my situation - I’m 60 single and have been disabled since the age of 40. I currently receive ESA support group benefit and higher rate PIP for care and mobility. My health is deteriorating and unclear and I am trying to sort out my affairs so I don’t leave my sister with an administrative nightmare. I will have full state pension contributions so could expect full state pension at 66.( if I last that long )

I have just transferred three small pension funds in cash totalling £160,000 into a HL SIPP and need some urgent advice and opinions on an interim (given Brexit fears) and longer term allocation of funds into a medium growth portfolio. I live simply as I am restricted and pretty much housebound. I have a mortgage free home and my expenses are currently covered. My objective is to leave most of my pension fund in due course to my sister who has children with challenges which mean they will require additional educational and life support.

The pension funds cash transfer completed quicker than I anticipated so I haven’t done much research yet . I now need to make decisions and instruct HL what to do with this cash. Should I find a short term interest paying account for 6-12 months or could you advise me on a balanced global portfolio of funds. ??
I would really appreciate any advice you could give me. Thank-you all in advance. 👏🤞

Linton

HL currently pays a low rate of interest on cash in SIPPs:https://www.hl.co.uk/charges-and-interest-rates. This is not a long term, or even medium term solution. You wont have access to high street bank type savings accounts from a mainstream SIPP.



The usually recommended investments for new investors are "multi-asset" funds which are individual funds (typically fund of funds) that hold a variety of different asset types. They are available at a range of risk levels and are intended to fully meet an investors needs rather than be part of a wider portfolio. I suggest you google the term to understand them further.



Multi asset funds are available from all the main fund managers - BlackRock, L&G, HSBC etc etc. You could ask more detailed questions once you have made an initial investigation.


Another option you have is to talk to an IFA. This might be particulalrly worthwhile if you have specific financial requirements arising from your circumstances.


BREXIT is not a major issue for someone investing broadly across the world. Trump and China is having far greater effects. Paradoxically if we have a disastrous BREXIT the £ will fall in value which means that investments based abroad or in UK based companies reliant on global business will be worth more in £ terms.

SonOf

nd opinions on an interim (given Brexit fears) and longer term allocation of funds into a medium growth portfolio.

What does Brexit have to do with it? (I don't know if you have read any of the threads about Brexit and investing - it may be worth it if you haven't).

Should I find a short term interest paying account for 6-12 months or could you advise me on a balanced global portfolio of funds. ??

Those two things have different objectives. Perhaps you need to work out your objectives first and then look at the solution. Not look at solutions before knowing the objective.

Also, a global portfolio of funds doesn't fit with the objective of leaving your sister with an administrative nightmare. Who is going to rebalance and adjust the funds when you are not able to do so? You suggest your sister. Is she knowledgeable enough to do such things?
Maybe a multi-asset fund would be the better option rather than the more advanced option of a portfolio of single sector funds.
Maybe a stakeholder or personal pension would have been better. Or using a local IFA who can be available to aid your sister.

Some of the above assumes deterioration to a level of incapacity. Is that likely to be the case? (its unclear from your post. It seems to suggest you expect that)
have you got lasting power of attorney in place?
Have you put the expression of wish in place?

Albermarle

Something to look out for is that HL promote their own funds/solutions, especially to customers who are not sure what to do . These are invariably expensive in terms of charges and without any clear evidence that they perform better than cheaper, simple solutions , like a simple multi asset fund.
The type of funds mentioned by Linton above usually have relatively low charges of approx. 0.25% pa then HL have their own platform fee of 0.45% ( also not the cheapest but at least it is a good and easy to use platform)

jellydream

Thank-you all for your thought provoking replies and pointers. Neither my sister or I are experienced investors but are prepared to take appropriate advice after I do some more research to better understand the issues involved. I was caught off-guard by the unexpectedly speedy transfers of the pension cash. I just chose the HL platform as I have other small investments with them and have found them efficient and as you say the user platform is straightforward. I will talk to HL and then consider an IFA consultation too once I have done some more research. Thank-you for pointing me in the direction of multi-asset funds which seem a good solution and the warning re:- fund charges. I really am not sure how long I will live but certainly don’t anticipate post age 75 or even 70 as I have advanced kidney failure, severe rheumatoid arthritis and other lesser medical issues.

I am not looking to these funds (160K ) for long term pension provision or to fund future care needs but to eventually provide additional security to my sister and her children. I therefore want to invest for a 5-10 year period. Thank-you for pointing me towards multi-asset funds. I have been reading up on them this evening and looking at performance tables (Money Observer). I think it would probably be best to split the cash between 3 or 4 multi asset funds with low costs and would welcome any suggestions or recommendations you may have. Thanks everyone :T

bowlhead99

jellydream wrote: »

I am not looking to these funds (160K ) for long term pension provision or to fund future care needs but to eventually provide additional security to my sister and her children. I therefore want to invest for a 5-10 year period.

Although you're thinking of a short timescale (between now and whenever you shuffle off this mortal coil), if it is to function as security to your sister's family I assume she is not going to spend it all on a £160k shopping spree to Hamleys the day it arrives in her bank account (or pension account if you end up living past 75 and it can't be transferred tax-free).

So even if you die in five to ten years, the money would be invested over a longer timeframe than that. The date at which it stops being yours and starts being hers is not really as important as you might think - assuming she is happy for this 'security' to continue to be invested at medium risk just like you are.

Thank-you for pointing me towards multi-asset funds. I have been reading up on them this evening and looking at performance tables (Money Observer). I think it would probably be best to split the cash between 3 or 4 multi asset funds with low costs and would welcome any suggestions or recommendations you may have. Thanks everyone :T

The point of a 'multi asset' fund is that it contains assets from multiple asset classes all in the one fund (e.g. UK shares, US shares, European shares, emerging market shares, government bonds and corporate bonds from all around the world, commercial property etc). If the fund has a decent mix of assets and is modelled to a sensible level of risk (volatility), it can function as your whole portfolio and save you building your own portfolio out of lots of different funds (e.g. UK fund, US fund, blah blah).

Having bought this multi-asset fund that can function as an entire portfolio, you don't need to then buy another three of them so that you've then 'split the cash between 3 or 4 multi asset funds'.

OK fair enough you could split between a couple to avoid having your entire pot of cash with one fund manager's product, but 3 or 4 is overkill.

As Linton mentioned, a lot of fund managers offer multi asset (mixed asset) fund solutions. Depending how much volatility (swings up and down in value) you or your sister can stomach, for investing over the next couple of decades you might look at something like L&G Multi Index 5 or 6, or Architas MA Intermediate or Progressive. The Architas ones are available as 'passive', 'blended' or 'active' with different associated cost levels with passive being cheaper.

You can look at lower volatility funds than those of course, e.g. L&G MI 4, Architas MA Moderate. Or similar from other providers (BlackRock, HSBC, etc etc). But the point is you don't need to actually buy 4 different funds, because each of the funds is itself very broadly diversified across types of assets.

[Deleted User]

Or you could pick (say) four stocks with strong dollar revenue and manage your SIPP yourself.

It seems daunting but there are advantages:
a) You can count on £5k pa of dividends (tax free)
b) You can mitigate the effects of any negative Brexit impact.
c) If there is a global downturn, you won't necessarily be better protected in a fund than a mega-cap. In any case, your picks should be sufficiently differentiated so that they do not perform as one, apples and pears.
d) When you do make gains, you don't have to worry about CGT, a further advantage over your current portfolio.
e) As Jane Austen says, "It is better to choose, than to be chosen." A SIPP gives you freedom, don't hand it back to a fund manager or, worse, an IFA. Worst of all, imo, would be to take instruction from Hargreaves Lansdown's own advisers. Their advice is biased towards their own products and, following the Woodford fund debacle, you may find you don't even have the freedom to switch funds.

cloud_dog

OP, I suggest you ignore the above post as it contains error or at least misguided information.

ZingPowZing wrote: »

Or you could pick (say) four stocks with strong dollar revenue and manage your SIPP yourself.

It seems daunting but there are advantages:
a) You can count on £5k pa of dividends (tax free)
b) You can mitigate the effects of any negative Brexit impact.
c) If there is a global downturn, you won't necessarily be better protected in a fund than a mega-cap. In any case, your picks should be sufficiently differentiated so that they do not perform as one, apples and pears.
d) When you do make gains, you don't have to worry about CGT, a further advantage over your current portfolio.
e) As Jane Austen says, "It is better to choose, than to be chosen." A SIPP gives you freedom, don't hand it back to a fund manager or, worse, an IFA. Worst of all, imo, would be to take instruction from Hargreaves Lansdown's own advisers. Their advice is biased towards their own products and, following the Woodford fund debacle, you may find you don't even have the freedom to switch funds.

[Deleted User]

What errors?

OldMusicGuy

ZingPowZing wrote: »

Or you could pick (say) four stocks with strong dollar revenue and manage your SIPP yourself.

Probably the worst thing an inexperienced investor could do.

Also, like others said, make sure you avoid the HL Multi Manager funds.

IMO you should select multi-asset funds from the likes of Blackrock, HSBC Global Strategy and Vanguard. Choose based on your risk profile.

I suggest you read "DIY Simple Investing: A Guide to Simple but Effective Low Cost Investing" by John Edwards. You might find it very helpful. Do not rush into doing anything - if you hold the money as cash in an HL SIPP it costs you nothing (and earns a tiny bit of interest).

[Deleted User]

"Probably the worst thing an inexperienced investor could do."

Why? Imo the worst but sadly most common thing an inexperience investor can do is watch her fortune be winnowed away by funds "rebalancing" every few days, shuffling stock from one fund to another and back again with a charge to her fund on each transaction.