Opinions on my SIPP with HL

morrow56

Hello, retire in 3 years, can anyone offer an opinion on my SIPP - currently worth £36,700.
Currently I am paying into HL £300 in total across the 5 funds per month
Vanguard Lifestrategy 80 - Acc - percentage of holding - 59.5% - Fund is up 19.09%
Fundsmith Equity Class I - Acc - percentage of holding - 15.6% - Fund is up 29.03%
Fidelity Index US - Class P - Acc - percentage of holding - 15.5% - Fund is up 28.68%
Baillie Gifford Positive Change - Class B - Acc - percentage of holding - 6.6% - Fund is up 5.7%
Baillie Gifford China - Class B - Acc - percentage of holding - 2.9% - Fund is up 1.8%
Any advice, comment gratefully received, find this forum extremely helpful
Thanks

Joey_Soap

Not a comment on the holdings at all. But let's say you decide to drawdown from your SIPP at a rate of say 3% of the pot's value each year. I want to point out that by using HL, out of the 3% you have to pay 0.45% to HL in fees. Leaving you with precisely 2.55% of your pot each year as drawdown. That's a truly massive hit to your income every year. I'd shop around if I were you to try to drive down that monthly fee. HTH.

garmeg

Joey_Soap said:

Not a comment on the holdings at all. But let's say you decide to drawdown from your SIPP at a rate of say 3% of the pot's value each year. I want to point out that by using HL, out of the 3% you have to pay 0.45% to HL in fees. Leaving you with precisely 2.55% of your pot each year as drawdown. That's a truly massive hit to your income every year. I'd shop around if I were you to try to drive down that monthly fee. HTH.

The 0.45% comes out of the fund not the drawdown amount so they can still take 3% and get 3%.
The funds also have charges (probably 0.5% on average as the Vanguard fund is cheap) so you need to allow for that too.
Whether a 3% drawdown is sensible or not is a separate issue. 

Joey_Soap

garmeg said:

Joey_Soap said:

Not a comment on the holdings at all. But let's say you decide to drawdown from your SIPP at a rate of say 3% of the pot's value each year. I want to point out that by using HL, out of the 3% you have to pay 0.45% to HL in fees. Leaving you with precisely 2.55% of your pot each year as drawdown. That's a truly massive hit to your income every year. I'd shop around if I were you to try to drive down that monthly fee. HTH.

The 0.45% comes out of the fund not the drawdown amount so they can still take 3% and get 3%.
The funds also have charges (probably 0.5% on average as the Vanguard fund is cheap) so you need to allow for that too.
Whether a 3% drawdown is sensible or not is a separate issue. 

There is no magic money tree. It's still his money and HL still grasp 0.45% off him. Whether it's 3% or 3.45% drawdown, HL still take their pound of flesh and 3.45% is a lot less sustainable drawdown than 3%. The underlying fund fees you can nothing about as long as you hold funds. And hopefully, the funds add wealth over time. That's what you pay the funds to do. But HL do nothing but syphon off the wealth that the funds hopefully create for you. HTH.

AnotherJoe

Many would  say that with under £40k just one fund would do. Maybe the VLS (I'm not a fan, there are other similar and IMHO better) but in any case not worth messing about with 5 funds .

But if youdo  want a selection, Id say cut down to 4 and the one to go would be the US Index.

Too much overlap between Index US and VLS. Move some of it into China and some into BGPC

So maybe you end up with 12% or so each in those two and 4 funds in all.

The fact you are 3 years from retirement doesn't help without knowing what other money you have and what other pensions and how long you intend to remain invested for in this SIPP.

For example do you intend to keep this another 20 years and you'll live off other income or will this be your drawdown fund in which case you'll be spending it all over what 2 or 3 years so you should sell it all this afternoon and go to cash now if you need that to live on ?

[Deleted User]

My wife has a pension pot of this value and it is 100% in BG Managed on HL.
Although with the 80/20 split (the OPs is something like 90/10) and the risk associated with it without other income or a cash buffer, for me is high.

morrow56

I have 11k with Santander 123 acc. and currently receive 3k cash a year from other pensions and earn 18k a year and will also get pension from Civil Service of 4k per year at 66

zagfles

Joey_Soap said:

garmeg said:

Joey_Soap said:

Not a comment on the holdings at all. But let's say you decide to drawdown from your SIPP at a rate of say 3% of the pot's value each year. I want to point out that by using HL, out of the 3% you have to pay 0.45% to HL in fees. Leaving you with precisely 2.55% of your pot each year as drawdown. That's a truly massive hit to your income every year. I'd shop around if I were you to try to drive down that monthly fee. HTH.

The 0.45% comes out of the fund not the drawdown amount so they can still take 3% and get 3%.
The funds also have charges (probably 0.5% on average as the Vanguard fund is cheap) so you need to allow for that too.
Whether a 3% drawdown is sensible or not is a separate issue. 

There is no magic money tree. It's still his money and HL still grasp 0.45% off him. Whether it's 3% or 3.45% drawdown, HL still take their pound of flesh and 3.45% is a lot less sustainable drawdown than 3%. The underlying fund fees you can nothing about as long as you hold funds. And hopefully, the funds add wealth over time. That's what you pay the funds to do. But HL do nothing but syphon off the wealth that the funds hopefully create for you. HTH.

But HL don't charge any extra for drawdown, which a lot of other providers do. You need to look at total charges, not just the headline annual charge. Google "snowman's spreadsheet" for a comparison of all providers.

bowlhead99

Some people will find a portfolio that's 90% invested in equity funds (as yours is) to be too volatile as they finish the 'accumulating' phase of their life and embark upon retirement where they are no longer contributing but drawing down from the pot instead.  If the pot halves in size for a few years due to a crash, the planned withdrawals from it would consume twice as much of the pot, as a proportion, during that time, and could conspire to prevent your pot lasting you the full length of retirement. 

If you plan to take all the money out of the SIPP in the year of retirement, the sequence of returns is not so much of an issue because reaching 'longevity' isn't a key objective. But it would be considered particularly high risk to be 90% in equities if you are going to cash all those equities in and withdraw the money in just 3 years time. It's pretty much impossible to comment further without any clue as to your objectives.

As an aside, I would ignore the 'fund is up x%' that you've tacked on to the end of the funds. As they will have been invested for different lengths of time, the numbers aren't comparable. Clearly the BG positive change fund (which is a relatively concentrated equities fund, which has given a total return of more than 90% over the last two years) may be expected to have greater volatility than the VLS80 (a diversified mostly-equities mixed asset fund, up about 15% in the last two years).

So showing that you personally are up 5-6% on BG PC and up 19% on VLS, is not really relevant to anything. It only serves as a distraction, if you were to be looking at your portfolio and being reluctant to buy or sell funds that were showing better or worse results based on your personal purchase timing.

bowlhead99

morrow56 said:

I have 11k with Santander 123 acc. and currently receive 3k cash a year from other pensions and earn 18k a year and will also get pension from Civil Service of 4k per year at 66

So you currently have 21k a year coming in

When you retire and get to state pension age you will presumably have state pension on top of that mentioned £4k civil service pension and the other £3k pensions. If your state pension is £9k a year, that would put you at £16k income, whereas if it was only £5k a year it would only be £12k a year income (quite a lot less than you're currently managing on) but if SP was £12k a year you would be on £19k which is very decent compared to what you currently take home.  You could get a forecast for the SP if you don't currently have one.

As we don't know how much SP you will get (and more importantly don't know how much income you'll want), it's not possible to guess how much you would want to take out of the SIPP or when. We might assume you would want to take the 25% tax free lump sum out immediately and stick it in an ISA, but then be happy with your levels of income from other sources and keep the rest invested for twenty more years.  In which case you could perhaps switch part of your portfolio to something lower risk which you then sell off to fund the 25%, while keeping the rest of the portfolio high risk as it is currently.

Alternatively, as we don't know how old you are- perhaps you might be looking to retire in three years and intend to draw down the whole of the SIPP over the three years after that to top up your income until you can access the state and civil service pension. With only a six year total investment horizon, with much of the money being pulled out before the end of that period, the current 90% equities allocation would definitely come across as quite risky.

I'm with Another Joe that the US tracker fund in particular seems unnecessary, as your VLS fund will already have a good chunk of US exposure and the other holdings such as Fundsmith and Positive Change will likewise hold 45-70% US investments from time to time.

dunstonh

morrow56 said:

Hello, retire in 3 years, can anyone offer an opinion on my SIPP - currently worth £36,700.
Currently I am paying into HL £300 in total across the 5 funds per month
Vanguard Lifestrategy 80 - Acc - percentage of holding - 59.5% - Fund is up 19.09%
Fundsmith Equity Class I - Acc - percentage of holding - 15.6% - Fund is up 29.03%
Fidelity Index US - Class P - Acc - percentage of holding - 15.5% - Fund is up 28.68%
Baillie Gifford Positive Change - Class B - Acc - percentage of holding - 6.6% - Fund is up 5.7%
Baillie Gifford China - Class B - Acc - percentage of holding - 2.9% - Fund is up 1.8%
Any advice, comment gratefully received, find this forum extremely helpful
Thanks

Overkill for such a small value.     Also, 3 years is short term.  What do you intend to do with the fund in 3 years?
You are investing above the risk profile of a typical UK consumer.  That is not an issue if you believe you are an above average risk taker when it comes to money.  Although you don't appear to have a lot put aside for someone close to retirement.  So, can you afford to take that risk?