How to invest the new SIPPs?

desiman

I'm in my early forties and as part of making some changes to my financial situation, I transferred two old workplace pensions (that I no longer contribute to) into SIPPs and wanted to get any thoughts or advice on my strategy here.

• SIPP1 ("the big one"). This is £100K and was sitting in a multi-asset fund in an old workplace pension. It has now been transferred to Vanguard (as cash). As 2022 looks (to me) a bit uncertain in terms of market performance, I’m going to monthly pound cost average the entire value over 2022, into the following split
• 75% - Vanguard FTSE Developed World ex-U.K. Equity Index Fund
• 10% - Vanguard Emerging Markets Stock Index Fund – Accumulation
• 15% - Vanguard Global Small-Cap Index Fund – Accumulation

I have no bonds in the portfolio. With the investment horizon I’m looking at, I want to remain fully in equities for at least the next 5 years before I start to drip feed in some bonds

·         SIPP2 ("the little one"). This is about £7000 and now in AJ Bell. I see this as a pot where I can test out my expertise at picking individual stocks. I want to make considered decisions, but overall my track record suggests I won’t be very successful. Still, it keeps me away from using my salaried income at stock picks and so this will be a little hobby. To make sure the money doesn’t just sit there forever while I muse over whether to go for a particular stock or not, I’m going to pound cost average a sum every month into Fidelity Index World. This will be the benchmark I have to "beat" with my own picks. 

Thrugelmir

Maximum risk doesn't equate to maximum returns. Different asset classes will top the table and be bottom of the table over a period of time. The art of diversification is to produce a postive return whatever the performance of the individual component parts. If your portfolio falls 10% in a period. Then it's going to take a 11.1% rise just to recover the lost ground. 

Alexland

For that value at 100% equities then I would just stick the £107k into Vanguard VEVE (0.12%) and transfer both SIPPs in specie to Fidelity (capped at £45 pa + £1.50 to reinvest quarterly divis) and take their £250 cashback offer. Sure holding emerging markets or small caps will improve diversification but they have their own risks and may not be worth paying extra for. Having said that we do hold a small cap ETF in our LISAs. We made a positive decision not to hold individual shares or emerging markets but still get some exposure from the developed world companies who operate there.

https://www.fidelity.co.uk/pension-transfer/?intcmp=hero1_sipp_cashback-offer_nov_2021#cashback-offer

Rather than drip feed into Fidelity Index World (discounted if held on Fidelity) paying AJ Bell all those trade charges do you have a workplace pension for new contributions as this may be more efficient especially if the employer offers additional matching or salary sacrifice to save the NI.

desiman said:

As 2022 looks (to me) a bit uncertain in terms of market performance, I’m going to monthly pound cost average the entire value over 2022

2022 is certainly uncertain, the same as 2021 looked and 2020 before it but on average it's better to have the money in the market otherwise everyone would keep withdrawing it to put it back in slowly. If you don't like the risk profile then don't go 100% equities.

MX5huggy

Why no UK? You’re choosing to invest passively in every stock market in the world but not the UK? 

Pound cost averaging, moving platforms/investments doesn’t seem to me to be reason to have half you money out of the market for a year. If you pound cost average and a big fall comes in Jan 2023 you’ll be worse off than putting all your money in now because your money will not of benefited from growth before the crash (say 2% per month). Some are holding cash ready for a buying opportunity but that is a different option.
SIPP 2 if that’s your idea of fun then crack on.

Vanguards platform fee is 0.15% which is going to cost you £150 pa you could be better off with a fixed fee platform. 

Albermarle

As 2022 looks (to me) a bit uncertain in terms of market performance,

Unless you have a crystal ball , then the future of market direction will always look uncertain. Not just in 2022 but every year after that.

Otherwise as said the lack of any UK % is an obvious anomaly .

desiman

@Alexland That fidelity option sounds pretty decent tbf and I will likely miss the cashback offer this time, but will look into it again esp as I hadn't come across the £45pa cap. 

@Albermarle @MX5huggy In terms of the UK anomaly, I have a current workplace pension (where my employer also contributes) where I am investing in UK in a FTSE250 fund. So with that in mind, I was looking to go global with these SIPPs

In terms of the drip feed idea for 2022, of course there are opportunity costs for going this way, just like there are benefits/risks going all in one go.  

Alexland

desiman said:

@Alexland That fidelity option sounds pretty decent tbf and I will likely miss the cashback offer this time, but will look into it again esp as I hadn't come across the £45pa cap. 

Just for clarity the cap only applies to exchange traded investments like ETFs not traditional funds. They hope to make up some of the difference with £10 trade charges on such assets so it works best with simple, large, inactive accounts.