HL SIPP into drawdown, ideas for small investment?

twiglet98

Originally posted on mazibee's thread in Savings: 

mazibee I'm a beginner and don't have any advice, but just wanted to say I've enjoyed reading this thread about investing £20K when so many are discussing ten times that, and much, much more.  I presently have £38K in an HL SIPP which has been held as cash since opening in 2018, I'm about to take 25% as a lump sum to deal with various unexpected outgoings, and have been worrying whether to leave the balance with them entirely in cash, or whether to put £10K into a fund. I'd read something in the weekend papers a while ago suggesting Fundsmith Equity, but from this thread I now have others to consider, including BG.  Does anyone think there's any reason to be cautious about a Scottish firm?

I have one small DB pension yet to take, 18 months to SPA, no other savings, divorced, working p/t and surviving on <£1K/month, but on that I cannot build a safety net for when the house and car both need big spends!

ETA

I have considered taking the 25% lump sum from this small SIPP many a time over the last couple of years when I have been faced with the possibility of an otherwise unmanageable expense, but I've always managed to avoid it.  This morning I have processed the application online, to move the whole £38K SIPP into drawdown and I should receive the tax free amount of c£9600 in a few days.  This will be in time to clear my credit card balances at the end of the month, and pay back a small loan from a family member.  Then I can look at the potential costs of replacing the boiler and the car with a clean sheet.

Now I have to consider instructions to HL for the balance of the SIPP that has moved into drawdown.  I will continue to work part-time until SPA in June 2021.  Currently I earn £760/month and contribute £35 to the company pension scheme, matched by the employer, and I was awarded WTC and CTR for 2020-2021.  Until SPA kicks in and with the small DB pension still deferred, if I take any drawdown income it need only be say, £80/month to offset reducing my weekend working from 6 hours to 4.

I need to decide whether to leave all the £28k in cash, or to instruct them to invest it.  Looking at 10 or 15 years hence, might it be a good idea to put £10k into a fund of some sort? 

When I draw the deferred DB pension it should generate a lump sum of no more than £25k and I'll cross that bridge when I come to it. 

green_man

If you genuinely are looking at a 10-15 year horizon then really you should probably stick this in a near 100% equities fund, of which there are thousands of options, but really a low cost global equities tracker fund is the default recommendation here.

Everyone will tell you not to try and time the market, and it’s time invested that matters, so based on that just go ahead and invest in your preferred fund.   On the other hand I have a much higher cash element to my portfolio currently than normal and feel quite twitchy about market equity valuations, I I may keep cash for another year or two (or until a crash when it will be invested).  But ..don’t take this last bit as advice.

When I draw the deferred DB pension it should generate a lump sum of no more than £25k and I'll cross that bridge when I come to it.  

See discussion elsewhere on the board on whether actually taking a DB lump sum offer is the right thing to do.  In many (most) cases it seems to be poor value.

Albermarle

including BG.  Does anyone think there's any reason to be cautious about a Scottish firm?

Bit of a strange comment , why should you be more cautious about a Scottish based investment firm ? Lots of large investment/pension providers are based in Scotland , usually in Edinburgh.

Perhaps more of a reason to be cautious is that many BG funds have done very well in recent years, mainly because they are heavily invested in the US , and particularly in tech firms . At some point they might come back down to earth with a bang.

You do not want to go from one  extreme ( leaving the pension in cash for two years ) to the other extreme of investing in potentially quite risky funds. 

 but really a low cost global equities tracker fund is the default recommendation here.

Or to dampen down potential volatility a bit, a low cost multi asset fund with a high ( around 80%) equity content . Something like HSBC global strategy dynamic .

AlanP_2

I replied to this on the original post in the the Savings board and I took the concern about "Scottish firm" to be Scottish independence possibility related.

atush

I like Fundsmith, has done well for me.  So has Scottish Mtg.  But as an inexperienced investor, i'd look at a multi asset global fund, maybe around 80% equities?  Vanguard etc.

Are you going to be adding to pensions, given you have raided yours?  I'd keep on adding.

BritishInvestor

atush said:

I like Fundsmith, has done well for me.  So has Scottish Mtg.  But as an inexperienced investor, i'd look at a multi asset global fund, maybe around 80% equities?  Vanguard etc.

Are you going to be adding to pensions, given you have raided yours?  I'd keep on adding.

I'd say it's the other way round - experienced investors tend towards the passive, diversified offerings and inexperienced towards selecting funds that have shown recent great performance.

twiglet98

AlanP_2 said:

I replied to this on the original post in the the Savings board and I took the concern about "Scottish firm" to be Scottish independence possibility related.

Yes, this, though perhaps it won't happen in my lifetime.

Thanks for your reply on the Savings board, copied here:

---"Define your objective - what are you investing for and over what time frame?

You need to retain a "safety net" of accessible cash for the house / car as you say so that doesn't leave a lot for investing.

Are you contributing to a pension as that would give your returns an immediate boost via tax benefits?

I wouldn't be at all concerned about using a Scottish firm, and I wouldn't get to concerned about which active fund(s) to use at this stage.

Once you know the Why you can think about, and ask for views on the What to get you where you want to go."

I like having SOME cash readily available - whether that's £300 or so cash at home, just in case eg the plumber does yet another quick rescue, or the same in a current account.  I've never had any investments.  When my last employer relocated in January 2018 I took redundancy and moved its DC pension into the HL SIPP, topping it up with some of the redundancy payment and gaining the tax uplift.  But I have not been able to add any more.

I eventually got a part-time job in July 2018 and I although I joined their DC pension scheme it will be such a small amount by SPA I will take it all as a (very) small lump sum.  I have a small deferred DB pension from former employment with L&G and will draw it at SPA if not earlier.  My earnings are about the same as I expect from State Pension, I don't need a lot to get by, but have been blindsided by big breakdowns this winter, hence the decision to take the tax free lump sum now.

With £28k or so now moved into drawdown, a small amount to most people but it's a lot to me, I thought perhaps it's sensible to try and grow some of it.  I'm thinking £10k to invest, and leaving the rest in cash in case there's another domestic catastrophe that needs a big outlay, eg a new roof or similar.  If it's a daft idea the whole drawdown pot can stay untouched for now and I'll think about it again when I no longer have any earned income.