Vanguard targeted retirement funds

smileguy

Hello everyone I was thinking of opening one of Vanguards targeted retirement sipps  is it a good idea with the chance the funds may fall even more?.Can I invest at the beginning of a tax year a lump sum and receive tax relief before I have actually earned  and paid tax on that money?.How is the tax relief paid into a sipp?.many thanks 

Marcon

smileguy said:

Hello everyone I was thinking of opening one of Vanguards targeted retirement sipps  is it a good idea with the chance the funds may fall even more?.

You'll have the same issue with pretty much whatever pension fund(s) you choose. 

smileguy said:

Can I invest at the beginning of a tax year a lump sum and receive tax relief before I have actually earned  and paid tax on that money?.H

Depends how much you plan to invest and how sure you are that you'll earn that much during the tax year. If you are an employee, have you maximised the amount your employer will contribute if they offer 'matching' contributions if you pay more than the minimum?

smileguy said:

How is the tax relief paid into a sipp?.many thanks 

The provider claims basic rate relief on your behalf and adds it to your pot. If you pay higher rate tax, you need to claim the extra relief yourself via your self assessment tax return or direct from HMRC.

dunstonh

is it a good idea with the chance the funds may fall even more?

If 2022 had been a positive year would you even ask that question?   Despite knowing that a negative year is always going to happen at some point.  And noting that it is statistically more likely for a negative year to follow a positive year than it is to get two negative years in a row.

Can I invest at the beginning of a tax year a lump sum and receive tax relief before I have actually earned  and paid tax on that money?

yes

How is the tax relief paid into a sipp?

Depends on the contribution.   Employer?  employee?  personal?

engagedandopen

Unless you go with a traditional insurer, it is almost certainly the case that tax relief will be authorised from HMRC and then added approximately two months later.

By contrast, traditional insurers pre-fund the tax relief, even for their SIPPs.  I much prefer going with traditional insurers for this reason, so that I feel my contributions are invested straight away.

These companies definitely pre-fund tax relief: Aegon, Aviva, Legal and General, NFU Mutual, Standard Life.

Albermarle

Hello everyone I was thinking of opening one of Vanguards targeted retirement sipps  is it a good idea with the chance the funds may fall even more?

The Vanguard targeted retirement funds are held within a SIPP/pension. There is no such thing as a Vanguard Retirement SIPP . Sounds a bit picky, but best to be clear that the SIPP is just the administrative/tax framework, and your money is held in investments funds within the SIPP. For example if you have  Vanguard SIPP, you can hold many different Vanguard funds within it, including the targeted retirement funds.

As it is a long term investment, whether you invest today or next month, will have little long term impact.

smileguy

Thanks for the replies I’ve been thinking of investing in a sipp for a while but unsure if to use vanguard or a bank or insurer that offers sipps. 

Audaxer

smileguy said:

Thanks for the replies I’ve been thinking of investing in a sipp for a while but unsure if to use vanguard or a bank or insurer that offers sipps. 

The SIPP is just the tax wrapper. It's the investments in it that are important. Many people on here have SIPPs and/or S&S ISAs through the mainstream online platforms. As well as the Vanguard platform there is for example Hargreaves Lansdown, AJ Bell and many more. You would need to do some research, maybe on this forum or the Monevator website to see which is best for your needs.

I think you can invest in the Vanguard Target Retirement funds in most mainstream platforms, but there are many other multi asset funds that you could also consider.

dunstonh

Thanks for the replies I’ve been thinking of investing in a sipp for a while but unsure if to use vanguard or a bank or insurer that offers sipps. 

Most banks don't offer a SIPP.  Vanguard is not a SIPP.  Most insurers only retail their SIPPs via intermediaries.

So, why do you want a SIPP? - answering that will help filter out the providers and plans that are not suitable for you.

bostonerimus

If you are thinking about saving for retirement then any employer plan you have access to should probably come first so that you get the max employer contribution as well as the tax benefits. Once that is done, or if it isn't an option, then a SIPP is a good idea. You can open a SIPP with vanguard and then put a Vanguard Target Retirement fund inside it. Make sure you understand what a target retirement fund does and compare it to a Life Strategy fund.

[Deleted User]

And noting that it is statistically more likely for a negative year to follow a positive year than it is to get two negative years in a row.

Statistically, this is wrong.  If you throw “heads”, the next throw has a 50% chance of being heads again. Previous year’s performance has zero influence on the likelihood of next year’s performance. Its called “random walk” for a reason.  People are wired to expect patterns even when none exists. 

Having said this, the market trends up over long periods of time and the earlier one invests, the better.  The OP should read a couple of books on the subject before picking any particular wrapper and products. Having said this, for someone who knows little, target date funds are a good product.  And Vanguard’s platform is likely a good option for smaller SIPP pots.

NoMore

You say the market trends up over time (I agree) so you can't compare it statistically to a 50 50 chance, as for it to trend upwards over time their must be a bias in positive returns, therefore resulting in more up years then down years (or any defined period to compare).

Your correct that previous years performance doesn't affect future performance, but there must inherently be a bias to positive returns for an upward trend over time to occur, again leading to the conclusion that its more likely to be positive than negative. How much more likely, I don't know.