Eggs and baskets

snarffie

Hi,

I have moved the cash from my existing pensions into an ii sipp and split the balance into two funds, namely VLS 80 (30%) and HSBC Global Dynamic (70%). I would be looking to retire in about 15 years.

The value of the SIPP is currently very low (around the £100k Mark), but going forward I am looking to max out contributions at £40k pa, so things will change quite rapidly going forward. As my investment period shortens and the value of my investments increases, I am wondering if I should aim to split my investment over two SIPP providers to avoid having my entire pension held by one company.  This could happen when I hit, say £250k.  It would make it a bit more difficult to balance the investments held, but I am planning to keep things simple with the trackers I have (or similar) going forward, so that might not be an issue.

i just wonder what people think of having investments spread between SIPP providers and at what point/value this might become a sensible thing to do.  I suppose the same goes for having all my money invested in just two funds, but I see them as well diversified and presumably safer from ‘defaulting’ than say a managed fund, but if anybody has any views on this, they would be welcome.

Thanks

Paul_Herring

i just wonder what people think of having investments spread between SIPP providers and at what point/value this might become a sensible thing to do.

Extra effort for very little gain, if you're thinking about the FSCS limits. https://www.fscs.org.uk/media/press/2018/dec/fscs-protection-pensions/

The research, undertaken by Populus, found that just under half (49%) of respondents do not think FSCS protection applies to pension products. Of those surveyed who have a pension, fewer than one in twenty (4%) were aware that the FSCS protects 100% of a pension directly managed under a life insurance contract(1). 

dunstonh

 I am wondering if I should aim to split my investment over two SIPP providers to avoid having my entire pension held by one company.

What would that achieve?  - are you with a company that has poor financials and/or poor admin?

It would make it a bit more difficult to balance the investments held, but I am planning to keep things simple with the trackers I have (or similar) going forward, so that might not be an issue.

You don't have trackers.  You have multi-asset funds. You dont need to balance multi-asset funds as they do that for you within the fund.

i just wonder what people think of having investments spread between SIPP providers and at what point/value this might become a sensible thing to do.  

Don't see the point.

 I suppose the same goes for having all my money invested in just two funds, but I see them as well diversified and presumably safer from ‘defaulting’ than say a managed fund, but if anybody has any views on this, they would be welcome.

Technically, you are in managed funds.   They use underlying passives but they make management decisions on the investments they hold.  Management lite as such.   Your funds have no more or less chance of defaulting than other managed funds.

Again, not much point if you are using mainstream unit linked funds.

Albermarle

Chances of mainstream funds and a mainstream SIPP provider going bust are extremely small , so I wouldn't worry about it .
Some people with larger sums ( say £250 K and above ) may have more than one pension  , in case one hits a big IT problem for example . Or can be just historical - keeping one low cost ex workplace pension + a more flexible SIPP as another example.
Plus there are a few very charge aware investors  , who keep OEIC funds in one SIPP and  ETF's /IT's in another due to differential charging on different products on some platforms. 

[Deleted User]

For the type of funds you hold, a single fund in one account is all you need. Thats already diversified

[Deleted User]

“Your funds have no more or less chance of defaulting than other managed funds.“
There are three types of risk with mutual funds: underlying securities (eg bonds) failing, the fund company going bankrupt and the provider going bankrupt. 

In the case of the OP these risks are extremely low. Other mutual funds could be far riskier, eg due to the risk of holding derivatives or illiquid assets. And the company offering your fund could be a lot more vulnerable than either Vanguard or HSBC

dunstonh

In the case of the OP these risks are extremely low. Other mutual funds could be far riskier, eg due to the risk of holding derivatives or illiquid assets. And the company offering your fund could be a lot more vulnerable than either Vanguard or HSBC

Whether is it passive or managed is not a reason.  It is how it invests and what it invests in that matters.     Indeed, there are passive funds that due to the nature of their structure are actually at a higher risk of defaulting (than other passives or managed).  Just as there are managed funds with illiquid assets that are also at high risk of defaulting.

The point being made is that you cannot say that you have less risk because its passive which was what the OP was saying.

[Deleted User]

dunstonh said:

In the case of the OP these risks are extremely low. Other mutual funds could be far riskier, eg due to the risk of holding derivatives or illiquid assets. And the company offering your fund could be a lot more vulnerable than either Vanguard or HSBC

Whether is it passive or managed is not a reason.  It is how it invests and what it invests in that matters.     Indeed, there are passive funds that due to the nature of their structure are actually at a higher risk of defaulting (than other passives or managed).  Just as there are managed funds with illiquid assets that are also at high risk of defaulting.

The point being made is that you cannot say that you have less risk because its passive which was what the OP was saying.

Thats true but in general, when we talk about passive investing, we refer to broad vanilla funds replicating the total stock-market. These are highly liquid and the risk of default is extremely low. Active funds often take more risk and go into “fancy” investment types to try and differentiate themselves. And to “beat the market”. After all, who wants a closeted passive fund at a higher cost? 

snarffie

Thanks to all for the advice and thoughts.  As I mentioned, I have my funds with interactive investor, so I believe that my funds are ring-fenced from them in the event of them (interactive investor) failing.  I hope that’s accurate!  With regards to the FSCS 85% protection, presumably this relates to cash balance held in ii and not the individual investments (unless they fail individually outside of ii)?

I’m still trying to get to the bottom of the 100% FSCS protection mentioned by Paul and need to get in touch with ii to understand where I stand with my investments.

I appreciate that the funds I hold are not strictly passive, but rather passives with a degree of management and I am comfortable with this in principle as opposed to choosing individual assets.

Albermarle

 As I mentioned, I have my funds with interactive investor, so I believe that my funds are ring-fenced from them in the event of them (interactive investor) failing.  I hope that’s accurate!  With regards to the FSCS 85% protection, presumably this relates to cash balance held in ii and not the individual investments (unless they fail individually outside of ii)?

If you have money in Vanguard funds that is where it is . So it is not ring fenced within ii as they have not got it .

If you had cash in the SIPP , then this is ringfenced and held in a separate bank account . 

So you have £85K( not 85%)  compensation if Vanguard go bust ( almost impossible to imagine ). Plus £85K for ii, in case of fraud ( also hard to imagine in such a public space ) plus £85K with the bank(s) your cash is held with .

I’m still trying to get to the bottom of the 100% FSCS protection mentioned by Paul
If instead of a SIPP , you have a personal , or workplace pension with one of the traditional pension providers ( also known as Insurers) then you have 100% unlimited protection . This is because if you have an Aviva pension ( for example) you can only invest in Aviva funds and the whole pension is very highly regulated , more than a SIPP is.

dunstonh

I’m still trying to get to the bottom of the 100% FSCS protection mentioned by Paul and need to get in touch with ii to understand where I stand with my investments.

II do not have any investments that qualify for 100% FSCS protection.  You will only find those on stakeholder pensions, most personal pensions and a small number of SIPPs from the major insurers along with most workplace pensions using internal funds from the insurers.

 With regards to the FSCS 85% protection, presumably this relates to cash balance held in ii and not the individual investments (unless they fail individually outside of ii)?

Savings get the £85k deposit protection

Investments get the £85k investment protection

They happen to be the same figure at this time but it hasn't always been that way in the past.