Capital preservation options SIPP

[Deleted User]

Stay diversified in low cost investments. Diversify between asset classes and within them. Stay the course. 

And if there is a fall, enjoy the thought that the taxman is sharing your loss with you. 

Albermarle

Also if you are still employed and receiving employer contributions and you are a 40% taxpayer , then it is still worthwhile adding to your pension , even with LTA tax.

gm0

I have been struggling with this same question. My current portfolio and access thinking is this

Small above LTA residue - hold to age 75. 100% equities.  40 year investment horizon.  May consolidate with other drawdown funds @ 75.  SORR irrelevant as not accessed. No TFC because above LTA.  All therefore subject to the 25% in 2040 (or whatever it is by then).  Held in existing occupational scheme in a global ethical tracker FTSE4Good Global at 0.06% drag all in.  Even if moved and consolidated 75+ this smaller investment is likely to provide a handy pension top up to heirs.

25% of LTA to TFC - reduces size of LTA growth/risk/portfolio selection issue - dispersed to capital projects, SORR cash buffer created.   ISA recycle the part not spent (capital projects, car refresh) into S&S ISA platform below)
Keep multi-asset element and "cash like" elements apart and in the desired proportions so that the buffering/suspension of drawdown on equities can work as planned

Remaining 75% is split into two. 

Half (37.5%) is in a passive equities tracker, held on L&G Worksave master trust platform, insured 100% protection basis,
0.18% all in cost. Crystallised.  Funds are an L&G World ex UK and a UK passive index tracker fund

Other half (37.5%) in an iWeb SIPP, (85k protection basis).  Gives access to fund range, actual bonds, specialist active and Wealth Preservation funds per discussion above.  Fund costs will be higher here.

Investment philosophy probably best described as "not all eggs in one basket or ideology"

In one (or both) of the 2 DC pension platforms I am also looking to diversify the large cap global equities more by diverting minority stakes to Small Cap and Emerging Markets funds. (and perhaps a Value focus fund also - still mulling this over)

Access approach

Drawdown is tax driven (draw nominal growth from the 75% 55-75 to restrain the levy to the uncrystallised residue+growth (more or less).  Capped at HRB single year (50k).  Nominal income target 3.5% WR initial. 2.5% floor. Extended Mortality method. 40 year plan.  Floor applied when equity sales not suspended as in a major correction event.  This calculation is largely to monitor whether things are broadly on track as the draw nominal growth requirement to skip the 25% levy drives most behaviour 55-75)

By 67 2x SP and spouse DB reduce the required draw.  So from 75 a switch to "spend pension last" approach if IHT rules unaltered.  Reduced draw and adjust ISA assets to the desired "care cost provision buffer level".  Spend/gift any property downsizing cash (which could be none or a few years income based on final destination) substituting for drawdown so that the estate consists of late retirement flat, care cost buffer and then the remainder is in the pension.  Then pay the 40% IHT but not very silly amounts if the plan has worked as planned.  Trim the sails with PET and gifting out of regular income as we go along.

Linton

roger8989 said:

Cus said:

Why do you think it's sensible to notch down the risk and preserve capital?
I am in a similar position, (over 10 years away from being able to access mine and over the LTA) and I constantly hop between your thoughts and the 'its a good tax to have, could miss out on lots of growth, enough time to ride a correction etc'.  So I'm interested in your reasoning. Thanks.

It is so difficult isn't it! I could keep it in higher risk equity hoping for a return and hence get 45% of something rather than 100% of nothing over the LTA. However, I know I have reached the limit and I wonder how I will feel if I invest badly and then reach 60 with less than I have now. I guess I would prefer to sleep well at night if there is a market correction and just accept 1-2% increase in value each year to keep up with inflation.
Thanks for the Troy trojan mention- yes, I am actually in this already and I like the statement that they will aim to preserve capital. 
I guess the other option is the ultra-short bond market index trackers- anyone have any experience of these?

I dont use them as I see no advantage over cash for a small investor.  Though perhaps they could be used as a cash proxy when you cant hold cash directly.

[Deleted User]

Albermarle said:

Also if you are still employed and receiving employer contributions and you are a 40% taxpayer , then it is still worthwhile adding to your pension , even with LTA tax.

Is that right? As opposed to putting after tax money into ISA? Would have thought using up ISA room would be more advantageous. Even taxable accounts could be competitive if you are subject to two sets of taxes on withdrawal. But I have not done the maths.

[Deleted User]

“i guess the other option is the ultra-short bond market index trackers- anyone have any experience of these?”

Yes. I use short term government bonds as well as high interest accounts and other bonds. For me there are some tax advantages. And less headache than with “high interest” cash. And the return has been a little better. 

Thrugelmir

roger8989 said:

Cus said:

Why do you think it's sensible to notch down the risk and preserve capital?
I am in a similar position, (over 10 years away from being able to access mine and over the LTA) and I constantly hop between your thoughts and the 'its a good tax to have, could miss out on lots of growth, enough time to ride a correction etc'.  So I'm interested in your reasoning. Thanks.

 I guess I would prefer to sleep well at night if there is a market correction and just accept 1-2% increase in value each year to keep up with inflation.

Switching to fixed interest i.e. Gilts. Could prove expensive if interest rates or inflation were to rise. Perhaps build a comfort zone before dialing back on the underlying portfolio volatility too far. 

[Deleted User]

Interesting little interview with Munger.

https://youtu.be/IY0flE2NZh4

1. We are in uncharted waters.
2. Expansion of money supply has been astounding.
3. We are playing with fire. Nobody has done that without having to pay a penalty.
4. Some of the bonds issued in Europe make no sense.
5. Returns will be lower. 

cfw1994

Deleted_User said:

Interesting little interview with Munger.
https://youtu.be/IY0flE2NZh4
1. We are in uncharted waters.
2. Expansion of money supply has been astounding.
3. We are playing with fire. Nobody has done that without having to pay a penalty.
4. Some of the bonds issued in Europe make no sense.
5. Returns will be lower. 

Interesting?  Really?
That has to be the least interesting and certainly the least useful I’ve watched in sometime.
Pretty certain we learned nothing but short warnings with zero detail.
I suspect most faintly knowledgable people here expect a low inflation and lower returns market for the next few years.  

Shame he couldn’t say when the bubbles would burst, but then doom-mongers rarely offer timeframes....

First comments say it all: “Charlie is getting smaller and The chair gettting bigger. Thats inflation allright!”, & that the interviewer failed to prepare or follow up at all on the fella’s vague warnings of fire, pestilence and flood ahead.

That European banks have borrowed sums over 100 years at a fraction of 1% explains how far down the road the fiscal can is being kicked.  The world will be a very different place by then, & neither you, me or Charlie will be around to care.

bowlhead99

cfw1994 said:

Deleted_User said:

Interesting little interview with Munger.
https://youtu.be/IY0flE2NZh4
1. We are in uncharted waters.
2. Expansion of money supply has been astounding.
3. We are playing with fire. Nobody has done that without having to pay a penalty.
4. Some of the bonds issued in Europe make no sense.
5. Returns will be lower. 

Interesting?  Really?
That has to be the least interesting and certainly the least useful I’ve watched in sometime.
Pretty certain we learned nothing but short warnings with zero detail.
I suspect most faintly knowledgable people here expect a low inflation and lower returns market for the next few years.  

Shame he couldn’t say when the bubbles would burst, but then doom-mongers rarely offer timeframes....

First comments say it all: “Charlie is getting smaller and The chair gettting bigger. Thats inflation allright!”, & that the interviewer failed to prepare or follow up at all on the fella’s vague warnings of fire, pestilence and flood ahead.

That European banks have borrowed sums over 100 years at a fraction of 1% explains how far down the road the fiscal can is being kicked.  The world will be a very different place by then, & neither you, me or Charlie will be around to care.

 Munger notes that the pace of innovation and change has been greater over the last century than those before it, and that various things are astounding or unbelievable - borrowing rates, the value of Apple compared to Rockefeller's entire oil empire etc.  We're in uncharted waters in terms of money printing. I agree with your post - it doesn't really take a 97 y/o billionaire to make these observations and this was a long way from the sort of insightful interviews that he and Buffett would do twenty or thirty years ago.

There was a comment that said "Noone cares what these dinosaurs say or think..60 cents for a filet mignon you are old as Moses bro". On the strength of this interview I can see why people wouldn't want to give up five minutes of playing on their Robinhood app just to watch him speak slowly about nothing much.