Personal Pension to SIPP

Gsea

Hello,

I’ve been following this forum for some time, and by no means have I become an expert on pensions, however, I do feel better informed regarding retirement planning, investing, drawdown rules etc. Respect to all you regular posters who give up your time to offer help and “opinions” to others.

Aged 59, I have a personal pension of c£500K invested in one of the Royal London Governed Portfolio Range and the fund is still 1.5% down on my highs of February. I understand there are some advantages to the RLGP range ie, relatively low fees @ 0.4% inc, annual profit share, 100% FSCS protection etc. However, without having the experience and confidence manage individual funds (as much as I would like to) I can’t help feeling I could get better returns elsewhere. If I look at some of the mixed asset funds frequently mentioned here and measure these against my RLGP fund, all of them outperformed the RLGP fund over the period of time I’ve been invested, even the VLS20.

If I were to move to a SIPP, I would want a low maintenance portfolio and I’m thinking of a mix along the lines of VLS40, VLS60 (only 6 years until drawdown). Would this be considered wise or should I consider adding more multi asset funds, something like the HSBC Global Strategy Balanced Portfolio C Acc?

With drawdown only a few years away is there any reason not to make a move away from the RLGP fund.

Looking at fees for any potential move I think VG would be best for the VLS only funds but if I add the HSBC fund, would Iweb be the way to go? When looking at fees, what does the “typical transaction cost” covers, as it appears to be around the 0.5% mark on the platforms I’m looking at.

(The plan is not to go into drawdown until aged 65.)

T.I.A.

Linton

I see no very good reason to go for multiple multi-asset funds other than it may make you feel happier which is reason enough. Make your decision primarily on which you feel has the best range of assets and management strategy rather than simply looking at charges. If you want to base your investment on mult-asset fund(s)  40%-60% equity sounds reasonable.  With drawdown you will be invested for perhaps 30 years and will need to cope with inflation.  So you dont want to be over-cautious.

Your estimate of typical transaction costs is way out unless you are talking about very small transactions.  Platforms that have a % based ongoing charge either have free fund trading or there is a very small charge.  AJBell for example charge £1.50. Fixed price platforms which would probably be best for your pot size have somewhat higher transaction charges.  For example II charge £9.99/month for any size pot and have a transaction charge of £7.99.

Mutton_Geoff

Gsea said:

If I were to move to a SIPP, I would want a low maintenance portfolio and I’m thinking of a mix along the lines of VLS40, VLS60 (only 6 years until drawdown). Would this be considered wise or should I consider adding more multi asset funds, something like the HSBC Global Strategy Balanced Portfolio C Acc?

This might be a good plan if you intended to purchase an annuity on retirement . You say 6 years to "drawdown", do you mean "6 years to commencement of drawdown" since this means you'd stay invested into drawdown perhaps forever or perhaps until you got disinterested and bought an annuity later in life. Your investment timescale may therefore be longer than 6 years and a VLS40 or even VLS60 too conservative for you.

Albermarle

As mentioned you seem to have misunderstood the SIPP fees , although each SIPP is a bit different 
The funds themselves also quote transaction costs but these are contained within the fund and probably best not to worry about them too much .
I would ( mildly ) disagree with Linton in that Vanguard, HSBC and other multi asset funds are all structured differently, and so having more than one can make sense. The end results will not be that much different for each one, but they will not be the same. Also there is little/no cost in having more than one .
Also as Mutton Geoff says you do not want to be too conservative if your are wanting the pension to hold its value well for a long drawdown period . However you also have to do what you are comfortable with as the higher % equity the more volatile it would be .

Gsea

Linton said:

I see no very good reason to go for multiple multi-asset funds other than it may make you feel happier which is reason enough. Make your decision primarily on which you feel has the best range of assets and management strategy rather than simply looking at charges. If you want to base your investment on mult-asset fund(s)  40%-60% equity sounds reasonable.  With drawdown you will be invested for perhaps 30 years and will need to cope with inflation.  So you dont want to be over-cautious.

Your estimate of typical transaction costs is way out unless you are talking about very small transactions.  Platforms that have a % based ongoing charge either have free fund trading or there is a very small charge.  AJBell for example charge £1.50. Fixed price platforms which would probably be best for your pot size have somewhat higher transaction charges.  For example II charge £9.99/month for any size pot and have a transaction charge of £7.99.

Thank you,

The reason I was considering moving into multi-asset fund was that they have outperformed my RLGP funds year on year since I have been invested, is this not considered a good reason or do you think I’m better remaining where I am.

Thinking about it, 40% equities may be too conservative and I should consider all in @ 60% equities. This will hopefully give me a fair return after inflation.

I think I need to better understand the fee structure, in the example of II above, what does that transaction cost cover and how frequently would it be charged?

Gsea

Mutton_Geoff said:

Gsea said:

If I were to move to a SIPP, I would want a low maintenance portfolio and I’m thinking of a mix along the lines of VLS40, VLS60 (only 6 years until drawdown). Would this be considered wise or should I consider adding more multi asset funds, something like the HSBC Global Strategy Balanced Portfolio C Acc?

This might be a good plan if you intended to purchase an annuity on retirement . You say 6 years to "drawdown", do you mean "6 years to commencement of drawdown" since this means you'd stay invested into drawdown perhaps forever or perhaps until you got disinterested and bought an annuity later in life. Your investment timescale may therefore be longer than 6 years and a VLS40 or even VLS60 too conservative for you.

Thank you,

Sorry, I do mean 6 years until commencement of drawdown. I currently have no intention of purchasing an annuity and I will stay invested, probably until I’m pushing up the daisies. Does this mean you don’t think it’s a good plan and I should stay with my RLGP fund.

Agree 40% equities now appears to be too conservative, not sure how comfortable I would be at >60% once in drawdown, perhaps a couple of years of >60%, pre-drawdown?

Gsea

Albermarle said:

As mentioned you seem to have misunderstood the SIPP fees , although each SIPP is a bit different 
The funds themselves also quote transaction costs but these are contained within the fund and probably best not to worry about them too much .
I would ( mildly ) disagree with Linton in that Vanguard, HSBC and other multi asset funds are all structured differently, and so having more than one can make sense. The end results will not be that much different for each one, but they will not be the same. Also there is little/no cost in having more than one .
Also as Mutton Geoff says you do not want to be too conservative if your are wanting the pension to hold its value well for a long drawdown period . However you also have to do what you are comfortable with as the higher % equity the more volatile it would be .

Thank you,

Agree, I think I need to get my head around the fee structure. On the face of it, SIPP fees, I think will be cheaper than my current 0.4% (on the right platform).

I was thinking that holding more than one multi-asset fund would give you that little bit extra diversity and if there is going to be little/no extra cost, why not.

Agree about being too conservative with the equity holdings, it’s the great risk v reward conundrum. However, I think I will need to target a minimum of 60% equities to achieve above inflation returns.

Gsea

With no comment on my current holding I’m not sure how it matches up to my proposed move? Any views on the RLPG funds, is there a good reason to stay put? Equities in the RLGP fund is currently sitting at ~40%, so fairly low, also should I be concerned that there is 12% in property, which feels is quite high at the moment.

Albermarle

You could try comparing it to a multi asset fund with a similar objective , like Vanguard Life Strategy 40 or HSBC global strategy balanced or Fidelity Multi allocator strategic.
Look over as long a time period as possible.

Linton

Gsea said:

Linton said:

I see no very good reason to go for multiple multi-asset funds other than it may make you feel happier which is reason enough. Make your decision primarily on which you feel has the best range of assets and management strategy rather than simply looking at charges. If you want to base your investment on mult-asset fund(s)  40%-60% equity sounds reasonable.  With drawdown you will be invested for perhaps 30 years and will need to cope with inflation.  So you dont want to be over-cautious.

Your estimate of typical transaction costs is way out unless you are talking about very small transactions.  Platforms that have a % based ongoing charge either have free fund trading or there is a very small charge.  AJBell for example charge £1.50. Fixed price platforms which would probably be best for your pot size have somewhat higher transaction charges.  For example II charge £9.99/month for any size pot and have a transaction charge of £7.99.

Thank you,

The reason I was considering moving into multi-asset fund was that they have outperformed my RLGP funds year on year since I have been invested, is this not considered a good reason or do you think I’m better remaining where I am.

Thinking about it, 40% equities may be too conservative and I should consider all in @ 60% equities. This will hopefully give me a fair return after inflation.

I think I need to better understand the fee structure, in the example of II above, what does that transaction cost cover and how frequently would it be charged?

The downside about going for higher returns is that broadly higher return comes with higher risk - eg how much does the fund fall in a crash.  If you are the sort of person who panics when the value of your investment falls and would be likely to sell out, then you may underperform a more cautious fund with less severe falls.  So you need to balance your returns with your capacity for risk.  The timescale is also important here.  If you are investing for say 20 years a higher return fund could be fine since there is enough time for long term growth to exceed short term fluctuations.  However if your timescales are short thern any crash could leave you with less monery when you needed it than when you started off.

On platform fees: there are 2 types of charges.
1) Ongoing charges - the platform charges you annually or monthly simply for holding your funds or shares.
2) Transaction charges - the platform charges you every time you do something - eg sell, buy, make a drawdown etc etc
Companies with higher ongoing charges often have lower transaction charges, sometimes zero, and v.v.  So the cheapest platform may depend on the frequency and nature of yor activity.

Gsea

The downside about going for higher returns is that broadly higher return comes with higher risk - eg how much does the fund fall in a crash.  If you are the sort of person who panics when the value of your investment falls and would be likely to sell out, then you may underperform a more cautious fund with less severe falls.  So you need to balance your returns with your capacity for risk.  The timescale is also important here.  If you are investing for say 20 years a higher return fund could be fine since there is enough time for long term growth to exceed short term fluctuations.  However if your timescales are short thern any crash could leave you with less monery when you needed it than when you started off.

Thank you,
As this will be my main source of income in retirement, I am being more conservative than I have been in the past. However I am comfortable at ~60% equities. Interestingly, the RLPG fund lost about 13% in March and I was pretty relaxed about it and surprised it didn't loose more. In this respect, I accept crashes will happen and hopefully recover over time. I will however be looking to reduce any drawdown during such crashes.

On platform fees: there are 2 types of charges.
1) Ongoing charges - the platform charges you annually or monthly simply for holding your funds or shares.
2) Transaction charges - the platform charges you every time you do something - eg sell, buy, make a drawdown etc etc
Companies with higher ongoing charges often have lower transaction charges, sometimes zero, and v.v.  So the cheapest platform may depend on the frequency and nature of yor activity.

Thank you,
I take it any internal re-balancing of funds is not chargeable.