My pension - thoughts and feedback

LookingForward20

Hi all,

I’ve spent many years reading this forum and have taken some great advice over the years. I feel I am now at the point I need a sanity check from the forum as I don’t feel my retirement strategy is on point and needs some changes.

In short – 35 years old, married with 1 dependant. Limited company director so take an income and dividends (£50k combined max) and invest directly into a SIPP every year. Current SIPP of £117,000 which I feel is lagging behind for my age and retirement aims (no other pensions). Aiming to invest £18k a year into my SIPP from this point moving forwards. Current pension portfolio spit is:

• Vanguard 100 – 40%
• Baillie Gifford Long Term Global Growth Investment – 10%
• HSBC Global dynamic – 30%
• Lindsell train global equity – 20%

I feel my fund choice is disjointed and not aligned. Am I better just having one of either Vanguard 100 or HSBC dynamic? Of the funds I have picked, where am I lacking and what do I need to consider to balance my portfolio long term?

For what it’s worth my risk level is high and I am plan to be invested for the next 23 years tapering down my risk and 48 and 58.

Thank you in advance for your help and comments.

HCIMbtw

Dont feel bad about your efforts with SIPP saving so far, you are not lagging and are in a good position.. im 33, on a reasonable salary within a large company, have been trying to put into pension over the past few years and you make my efforts look pathetic 

A big part of that reason is the early company scheme was terrible for new/younger employees.. and my AVCs are still not counted as salary sacrifice, so I do not get national insurance tax benefit.. but i'll keep asking to get it to change.. also lets not ignore the costs of living, mortgages and marriage.. 

Personally I wouldn't be spread over so many funds, I can't be bothered reading about and trying to keep track of them, and would stick to a global multi asset fund such as HSBC 

But you are doing great, stick at it! 

EDIT: just checked I'm at £33k for context, pretty much similar circumstances to you, by the time I am 35 probably going to be at £50k at best even contributing 15% salary per annum with company top up of 5%... have saved nearly £12k in an S&S isa over the past year though, I am actually planning for my S&S isa savings to help more with earlier retirement in the future, rather than pensionable savings tho..

Linton

Your choice of funds is fine as higher risk for the long term.  It could be argued that 4 global funds is 2-3 more than necessary but it doesnt really matter.  The biggest overlap is probably between the Vanguard and HSBC funds so I think you could dispense with one of these if you really wanted.

If you are happy with the risk you could have a look at a small companies fund as small companies are not well represented in your portfolio at the moment.  You could increase the % in the Baillie Gifford fund a bit, though not too much as it is very focussed.

But all this is marginal.  You seem sensibly invested to me given your circumstances and with your high planned contributions your should be able to look forward to an early and comfortable retirement.

Albermarle

£117K at 35 would be way above average , so not much to worry about there .
Am I better just having one of either Vanguard 100 or HSBC dynamic?
They are not the same - notably the Vanguard fund has a UK bias , whilst the HSBC funds do not .When you compare like with like the Vanguard LS funds have underperformed this year due to that , although next year might be different.
As they have very similar costs , no big issue to have both to cover both angles.

LookingForward20

Thanks for your replies - much appreciated. 
HCIMbtw - interesting point re your S&S ISA. I am thinking of doing similar in terms of savings now but will probably aim slightly under my current risk level. Are you planning on investing in the same funds as your pension or looking at alternatives?
Linton and Albermarle - thanks for the insight. I have taken your comments on board. 

HappyHarry

Fund choice aside, are you personally contributing to your SIPP or is the Limited Company contributing? 

If if you are personally contributing, it would usually be beneficial for the limited company to make contributions instead, and you take a lower salary / dividends in return.

This could then save on either NI contributions (employer and employee), or corporation tax and dividend tax.

[Deleted User]

 Perhaps you are feeling slightly uneasy because you have allocations inverse to the gains made by your funds.
If you used those proportions to start your investment journey three years ago, you would be up c 43%
If you started from the same point with 25% in each, you would be up c 72%
I notice that yours are top on HL's  fund list. They are posting respectable figures but, to put them in perspective, the gains made by the four biggest companies over the same period far out-run them.

LookingForward20

HappyHarry said:

Fund choice aside, are you personally contributing to your SIPP or is the Limited Company contributing? 

If if you are personally contributing, it would usually be beneficial for the limited company to make contributions instead, and you take a lower salary / dividends in return.

This could then save on either NI contributions (employer and employee), or corporation tax and dividend tax.

Limited company is contributing. 

HCIMbtw

LookingForward20 said:

Thanks for your replies - much appreciated. 
HCIMbtw - interesting point re your S&S ISA. I am thinking of doing similar in terms of savings now but will probably aim slightly under my current risk level. Are you planning on investing in the same funds as your pension or looking at alternatives?
Linton and Albermarle - thanks for the insight. I have taken your comments on board. 

They invest slightly different but both global multi asset funds. It's actually very unclear what my pension is invested in, the fact sheets don't provide a particular transparent breakdown. I expect my ISA is slightly higher risk investment than my pension, which probably makes little sense, I have considered changing it, just a bit scared of getting my pension wrong and was feeling OK allowing the fund/pension managers for our company handling it. It hasn't actually had much time in this fund so might review in a years time to see how comfortable I am with its performance. At the moment I put a bit less than £1k into pension each month (about 15% pre tax pay).

I've always tried to pay a bit extra into company pension, but for the past year in particular have known that I would be able to save a chunk more. First thing I did was save a rainy day fund (e.g. if I get made redundant, around £8k) this just sits in premium bonds and I plan to do very little with it. The logic being its safe and I should be able to withdraw very quick if I ever need it. 

I've then had just less than £1k (lets call it £1k) to do something with each month and I settled on a S&S ISA. 
Now this kind of made sense to me because: 
- If I used the extra £1k as pension contributions it would only get 20% tax relief (not 40% - otherwise pension contributions would've been a no brainer)
- I would likely have to pay tax on withdrawals from pension at a later date 
- Access to the pension funds is more difficult than an ISA 
- I think there is a reasonable chance I want to access the money in my 50's 

Now the latter point is really important, and one of the reasons I also shirked a LISA. I don't think LISA's are bad, I just don't want to lock my money away and want the easy flexibility to access it if circumstances change. I'm also a bit financially lazy and can't be bothered having loads of different accounts with different banks. 

So right now I just put that extra in Vanguard 100. Maximum risk and exposure to equities as I am planning on the money being there for at least 20 years. Vangaurd offered the cheapest platform for me to make regular contributions each month. If/when I've saved £30-40k i'd plan to move a lump sum into a platform like iWeb to take advantage of the lower platform fees but maintain regular monthly contributions on the vanguard platform. When porting from vanguard to iWeb I might also switch that out of a vanguard fund and into something like HSBC FTSE All World Index accumulation fund as I will have a bit more choice. 

That's my thought process anyway.. I try not to make it to messy. 

Albermarle

I've then had just less than £1k (lets call it £1k) to do something with each month and I settled on a S&S ISA. 
Now this kind of made sense to me because: 
- If I used the extra £1k as pension contributions it would only get 20% tax relief (not 40% - otherwise pension contributions would've been a no brainer)
- I would likely have to pay tax on withdrawals from pension at a later date 
- Access to the pension funds is more difficult than an ISA 
- I think there is a reasonable chance I want to access the money in my 50's 

These are all valid reasons for choosing ISA over pension . You are effectively exchanging the 6.25% tax benefit of the pension in return for early accessibility . If your pension contributions are made by salary sacrifice then you are also losing the NI savings .

So right now I just put that extra in Vanguard 100.

You might want to look at one of the Vanguard global trackers as an alternative . No UK bias and no active management input at all .

BritishInvestor

Linton said:

Your choice of funds is fine as higher risk for the long term.  It could be argued that 4 global funds is 2-3 more than necessary but it doesnt really matter.  The biggest overlap is probably between the Vanguard and HSBC funds so I think you could dispense with one of these if you really wanted.

If you are happy with the risk you could have a look at a small companies fund as small companies are not well represented in your portfolio at the moment.  You could increase the % in the Baillie Gifford fund a bit, though not too much as it is very focussed.

But all this is marginal.  You seem sensibly invested to me given your circumstances and with your high planned contributions your should be able to look forward to an early and comfortable retirement.

Surely a bit of a stretch to say Lindsell is global when >60% of the holdings are in 10 shares?