What funds for SIPP?

Clive_Woody

Harribo1 wrote: »

Due to a period of poor performance and high fees, I've decided to move my pension which was managed by an independent adviser to a SIPP on the AJBell platform.

I'm looking at funds to invest in, and having done well out of the Lifestrategy fund in a S&S ISA I'm leaning towards the Vanguard Target Retirement 2040 Fund.

As far as I can tell, this has a good performance and is spread across various asset classes but I'm wondering if this is a diverse enough strategy and if not, what funds would people recommend investing in?

For context, my current portfolio is spread across 20 funds, one of which (M+G property) has been suspended, hence why I'm sceptical about the benefit of paying for an adviser and spreading across so many funds.

I'm 33 yo and I will be putting approx £180k into the SIPP now and hopefully £40k/pa ongoing.

I plan to retire at 55 when I can get my hands on some of the cash and I have an appetite for risk vs reward.

Any advice welcomed!

I caution that I am no adviser and have learnt mostly from folk on here, but I am sure you could do a lot worse than sticking it all in a SIPP invested in VLS100 given you age and the time period until your planned retirement.

As you get older you could move funds into VLS80, 60, 40 or 20 to lessen the impact of dramatic changes in the market, but keeping a decent chunk invested in higher risk to maximise growth. Essentially doing your own target retirement fund but keeping an element of control over it yourself, while hopefully ensuring decent returns throughout your retirement.

I would also keep maximising your S&S ISA as well to allow flexibility. You will probably benefit from talking with an IFA at some point to plan your end game to become a retiree.

I await more experienced folk to arrive and tell me I am talking rubbish :beer:

kinger101

Harribo1 wrote: »

b) At the minute, the plan is to take the 25% lump sum and buy an annuity, who knows what the future holds but this is what I am planning for

An annuity with the remaining 75 %? In that case, I don't think the Vanguard fund is the right product. Based in the split in the Target 2020 fund, it seems it's roughly a 1/1 split of bonds and equities at the target retirement age, and reduces further into retirement.

https://www.vanguardinvestor.co.uk/what-we-offer/target-retirement-products

Funds aimed at annuity purchase generally ramp down in the ten years before the target date to zero equities.

Something like this



Personally, I think it would be better to read up a bit more on the drawdown option. IMO, the higher returns outweigh the risks, and one can always buy an annuity later in retirement (e.g. at 75) as one becomes less inclined to manage the process.

A single RPI-linked annuity for a 55 yo currently yields about 1.7%, whereas it's around 5% at 75. Perhaps someone else can enlighten us on a "safe" drawdown rate at 55? I suspect it's not that much different from the rate at 65.

c) I have no idea but I'm planning for no as currently no other source of income other than the company I run.

Just checking - presumably it is your company making the pension contributions rather than yourself. This is the most tax-efficient way.

bostonerimus

Harribo1 wrote: »

Due to a period of poor performance and high fees, I've decided to move my pension which was managed by an independent adviser to a SIPP on the AJBell platform.

I'm looking at funds to invest in, and having done well out of the Lifestrategy fund in a S&S ISA I'm leaning towards the Vanguard Target Retirement 2040 Fund.

Both the VLS and Target Date funds are just fine, but realize that the VLS funds will keep a constant percentage of equities and bonds and the Target Date fund will slowly decrease the percentage of equities as you approach retirement. By going over to either of them you should save some money in fees and be able to easily track your performance and I bet you'll do just as well as any portfolio that you pay an IFA to develop and manage. But before you jump do some reading and understand a bit about asset allocation and what to do when times are tough...FYI if you own VLSxx you'd just sit tight as it rebalances automatically.

bostonerimus

Harribo1 wrote: »

a) I think when I did the assessment with the FA when I set up the pension 7 years ago I was classed as 'moderately adventurous, one down from the greatest level of risk.
b) At the minute, the plan is to take the 25% lump sum and buy an annuity, who knows what the future holds but this is what I am planning for.
c) I have no idea but I'm planning for no as currently no other source of income other than the company I run.

With interest rates so low right now I would not buy an annuity. If you want to have some safe income I'd look at a savings bond ladder and then you can buy an annuity if rates go up or you are older.

[Deleted User]

The guy is 33. Any discussion about annuity is premature by several decades. Things change.

The difference between VLS X and target date funds is also a bit hypothetical. I would expect him to review his investment policy in a decade or so.

Thrugelmir

Harribo1 wrote: »

For context, my current portfolio is spread across 20 funds, one of which (M+G property) has been suspended, hence why I'm sceptical about the benefit of paying for an adviser and spreading across so many funds.

Property provides portfolio diversification. Whether one should hold such assets through an open ended fund is another discussion. However whether the fund is tradeable or not is of no consequence. As it's not as if you are in need of the funds in the short term. Knee jerk reactions to noise are best avoided. Herd instinct is to stampede for the exits. Investing is a long term pastime. Volatility is part and parcel of the game.

[Deleted User]

Property is already a part of indices comprising such funds as VLS. Buying more property beyond that is a wild bet on a particular asset class.

The value of “diversification” provided by property is questionable. It has strong positive correlation to the industries inhabiting a particular type of property - or companies that provide mortgages, home improvement goods and construction, if its residential. Besides, most people already hold a high percentage of their net worth in residential property.

Depending on how the property is held, it is often illiquid in times of trouble at the exact time when you need it.

kinger101

Deleted_User wrote: »

The guy is 33. Any discussion about annuity is premature by several decades. Things change.

The difference between VLS X and target date funds is also a bit hypothetical. I would expect him to review his investment policy in a decade or so.

They're planning on retiring at 55. In one decade, that 2040 fund will have a 65/35 split.

The differences between fixed and sliding asset allocations are not hypothetical. The fund matches the set allocation, or it doesn't.

[Deleted User]

kinger101 wrote: »

They're planning on retiring at 55. In one decade, that 2040 fund will have a 65/35 split.

The differences between fixed and sliding asset allocations are not hypothetical. The fund matches the set allocation, or it doesn't.

And? 65/35 seems like a pretty decent way to allocate assets if you are within 10 years of retirement. You ought to be moving to something like VLS 60 if you are not in a target date.

Obviously other factors involved. Like he might change plans on retiring at 55 or he might be so filthy rich that none of it will matter.

Thrugelmir

Deleted_User wrote: »

Property is already a part of indices comprising such funds as VLS.

What property does VLS hold as a direct investment?