SIPP Question

greencar1975

Hi there,

I have a teacher pension which I can access at 60 (final) then 67 (career average) but need a bigger pension pot to allow me to retire early - I am 48. 

I am risk averse and am overwhelmed by the number of funds to invest in should I go down the SIPP route. Any recommendations? I like the look of Hargreaves Landsdowne but they are expensive - are they a safer bet than a platform like Interactive Investor?

Thank you

Nebulous2

How early do you want to retire? 

Looking at options through your own pension scheme might be your best starting point. 

The SIPP provider is simply providing the administration and purchasing the funds on your behalf then holding them for you - with the biggest difference and biggest impact being price, what do they charge?. In general you would want one based on a percentage for a small pot and a fixed price for a bigger pot. 

The SIPP provider will have a few recommended 'buys' but doesn't provide advice. You are on your own in choosing. If it were me, from my own mistakes, I'd keep it simple and buy a global tracker with a view to long-term growth. Other options are things like Vanguard Life Strategy series, that invest in bonds as well as shares to reduce risk - though that hasn't worked in the last year or so. They are denoted by numbers with VLS 60 having 60% shares and so on. 

greencar1975

Thank you. Ideally would like to look at a phased retirement in 9 years (will be 57). I would then be able to access my final salary pension at 60 then rest of TP and state pension at 67.

Are the global tracker funds the same as 'indexes'?

Linton

greencar1975 said:

Thank you. Ideally would like to look at a phased retirement in 9 years (will be 57). I would then be able to access my final salary pension at 60 then rest of TP and state pension at 67.

Are the global tracker funds the same as 'indexes'?

Indexes are a measure of the value of a market as modelled by a defined set of investments.  There are a very large number of indexes, one subset being indexes that claim to follow global markets though practicality, cost, and possibily polilitics  limit the extent to which they do that. So different global indexes can behave differently. Indexes are defined and managed by specialist companies whose business is to sell data.  

Tracker funds are investments whose value is managed so as to follow a specified index.  Global trackers follow global indexes.

There are indexes for which there are no tracker funds and some tracker funds that follow bespoke indexes not available elsewhere.

Pat38493

There is a quite a lot of literature and research suggesting that if you are a single investor investing for the long term, investing in these index tracker type funds is the most prudent way to go - the chances of you beating low charge index tracker platforms over the long term are very slim - very few active fund managers do that over multi decade periods and your chances of selecting the right one are next to nothing.

Also if you are just investing in index funds, HL may not be the optimum as I think their charges are pretty high and although the charges might look like a tiny percentage, the compounding effect over decades is significant.

MX5huggy

Don’t dismiss taking your CARE element of the TP early at the same time as the Final Salary. Yes you will have reductions for taking it early but these only represent the fact you will receive that pension 7 to 10 years early. If you refuse the optional lump sum you can boost the annual amount back up. 

JohnWinder

https://www.bogleheads.org/wiki/Indexing. This will take you another step further.

greencar1975

Thank you. 

That's interesting about HL being pricey in the long term. Their website is excellent as is their customer service but I'd be interested in cheaper alternatives. Interactive investor?

If I take my CARE part of my TP, It won't be enough to live off factoring in any reductions. 

dunstonh

I am risk averse and am overwhelmed by the number of funds to invest in should I go down the SIPP route.

What risks are you averse to?
For example, not saving enough for retirement is a risk.     
Taking too little investment risk is potentially an increased risk (it increases shortfall risk and inflation risk)
Taking too much investment risk is an increased risk.
Everything has risks.   It is just varying degrees and if you reduce risk in one area, it can increase risk in another.  So, you need to find balance.

If you are nervous about having 30,000 different investment options then you shouldn't be picking a SIPP.   Maybe go with alternative pension types that restrict investment options.     Or ignore the fact that there are over 30,000 investment options and stick to multi-asset funds.

 I like the look of Hargreaves Landsdowne but they are expensive - are they a safer bet than a platform like Interactive Investor?

What do you mean by safe?  HL are one of the most expensive platforms on the market but they have good software and possibly one of the better ones for someone completely clueless about investing.   HL's service has had criticisms from people over the last year or two and their marketing has often been misinterpreted as advice.    So, it's not all positive but then no company ever will be.  

Pat38493

There are a few that you can sign up to like Vanguard where you are restricted to a relatively small set of funds that you can pick from.  

Albermarle

The OP is risk averse, so index trackers are maybe not the best way forward as they are potentially too volatile.

OP - have a think about what you would do if your investments in a pension dropped 40% in a couple of weeks during a bad market crash.
 It is almost always better not to pull out and to hang on and wait for the recovery. If you would panic and pull out then index trackers are not for you.
However there is a middle ground between these types of investments and sitting in s safe savings account, such as multi asset funds with less ( but some) volatility.