What are my options in a Vanguard SIPP, if I wanted to give stocks a rest for a little while?

DraxDomax

peterg1965 said:

AlanP_2 said:

How are you / what are you using to get 4.3% guaranteed for 3 years within a pension wrapper?

MM funds follow overnight SONIA rates normally, which have a relationship with base rate so are variable.

My pension is now back with InvestAcc - Minerva SIPP, which is a FULL SIPP and permits access to 3rd party fixed rate savings bonds/accounts, so I have £220k in a 3 year fixed rate bond with United Trust Bank - current rate is 4.35%.  

I use the Investsense website which has an up to date list of all SIPPable savings accounts.

Even the Metro Bank SIPP account, which is where my other cash sits, pays an 'instant access' 1.95%

This is an excellent piece of information.

Not for me, as my SIPP is with Vanguard (hence the specific question in the post) and, as far as I understand, I can only contribute to ONE SIPP in each tax year?

But I admire that you found a really nice savings rate and shared it with us. 
I hope someone looking for such a bond investment finds this. 4.35% guaranteed is nothing to sneeze at!
For example, I personally would never consider taking a loan at this APR  
If I were retiring and just looking to lock a fixed income, that would have stretched my drawdown plenty.

I bet the 4.35% figure isn't available for a 20 year term and is more of an effect of the current rate increases?

Sarahspangles

I haven’t read the whole thread but it seems like you’ve asked a question ‘I have a Vanguard SIPP but don’t want to actively invest right now” and everyone has an opinion on that!

Have you considered just moving your SIPP to another platform? i guess you would be looking for one that pays a bit of interest on cash and allows you to hold savings accounts or bonds.

Albermarle

Not for me, as my SIPP is with Vanguard (hence the specific question in the post) and, as far as I understand, I can only contribute to ONE SIPP in each tax year?

Don't know where you got that idea from.

You can contribute to as many pensions as you like in any tax year. The only restriction is on how much you can contribute and get tax relief on in a tax year. Your contributions can go to just one pension, or split over a few.

Normally of course people do not split contributions over numerous pensions, as there is not much point, but you can if you want.

Also if you wanted to transfer completely  from Vanguard to another pension, this can usually be done in a few minutes on line, and as you are already in cash, the transfer would hopefully happen in a week or two.

hara____

If your risk tolerance is that low then the only Vanguard options are a) uninvested cash, which I think earns about 2% at the moment or b) their money market fund which earns SONIA, so over 4%

On your question about bonds: sounds like you might find it useful to learn more about interest rate risk and bond duration. Bond funds containing 25-year gilts are high risk. Vanguard give their long duration gilt fund a high risk rating of 6 out of 7.

Dazed_and_C0nfused

Not for me, as my SIPP is with Vanguard (hence the specific question in the post) and, as far as I understand, I can only contribute to ONE SIPP in each tax year

Where have you got that idea from 😳

eastcorkram

Dazed_and_C0nfused said:

Not for me, as my SIPP is with Vanguard (hence the specific question in the post) and, as far as I understand, I can only contribute to ONE SIPP in each tax year

Where have you got that idea from 😳

Don't know where that poster got it from, but I've heard it a few times. Almost as common as needing 35 years for a UK pension.

I have an HL SIPP , company pension goes in via salary sacrifice. I opened one with Fidelity, and pay in random amounts each month. Now, I realise , for the NI , I should really just increase the work contributions, but it suits me to do it the way I'm doing it .

 When this came up in conversation at work, more than one person said I shouldn't be doing that as it's not allowed, and even said if my employer finds out , they'll chuck me out of the work scheme, as you're only allowed one SIPP. 

Secret2ndAccount

DraxDomax said:

...
I got especially confused when I saw that some bond funds made considerable losses during some periods?
I thought the idea is:
Government needs money so they ask you for some money upfront and promise a % interest.
Being a government (of a somewhat serious country) that can print money, they'll always return their debt.
So, how do these funds generate a 7% loss YTD?

You lend the government £100. Every 6 mths they send you £1. After 5 years they give you back £100.
Note: the duration could be anything - not just 5 yrs.  The payment frequency could be anything, not just every 6 mths. The Coupon - the 'interest' payment could be anything, but it's fixed, so you know exactly what your return will be.

Suppose you bought a bond just like this a few years ago, when interest rates were low. So your Coupon is just £1 every six mths. Buy a similar 5 yr bond today, and it might pay out £2.50 every six mths. You have two options: i) wait out the full 5 years and get your full £100 back - hold to maturity is always an option. (ii) dump the bond - sell it to someone else for whatever you can get. That might be £93, but you can then do whatever you wish with that £93 today. That's how somebody could get a £100 bond for £93. If they are willing to hold it until it matures, they get the full £100. They won't be getting great payments in the interim, but they know exactly what they are buying.

I could go on forever, but I will say just two more things:
i) Most UK Government bonds pay out £100, but that is not necessarily the initial price. For example, a 5 yr bond might return only a tiny coupon (a poor interest rate if you like), but it sells for maybe £85. So you get no interest, but you make your money when the bond matures. They might launch two  bonds at the same time, with the same duration, but different coupons. The initial purchase price would be different, and the price if you choose to trade it mid-life would most likely be different too.
ii) Some bonds are index linked - your return tracks the rate of inflation, rather than being fixed.

HTH

L9XSS

Secret2ndAccount said:

DraxDomax said:

...
I got especially confused when I saw that some bond funds made considerable losses during some periods?
I thought the idea is:
Government needs money so they ask you for some money upfront and promise a % interest.
Being a government (of a somewhat serious country) that can print money, they'll always return their debt.
So, how do these funds generate a 7% loss YTD?

You lend the government £100. Every 6 mths they send you £1. After 5 years they give you back £100.
Note: the duration could be anything - not just 5 yrs.  The payment frequency could be anything, not just every 6 mths. The Coupon - the 'interest' payment could be anything, but it's fixed, so you know exactly what your return will be.

Suppose you bought a bond just like this a few years ago, when interest rates were low. So your Coupon is just £1 every six mths. Buy a similar 5 yr bond today, and it might pay out £2.50 every six mths. You have two options: i) wait out the full 5 years and get your full £100 back - hold to maturity is always an option. (ii) dump the bond - sell it to someone else for whatever you can get. That might be £93, but you can then do whatever you wish with that £93 today. That's how somebody could get a £100 bond for £93. If they are willing to hold it until it matures, they get the full £100. They won't be getting great payments in the interim, but they know exactly what they are buying.

I could go on forever, but I will say just two more things:
i) Most UK Government bonds pay out £100, but that is not necessarily the initial price. For example, a 5 yr bond might return only a tiny coupon (a poor interest rate if you like), but it sells for maybe £85. So you get no interest, but you make your money when the bond matures. They might launch two  bonds at the same time, with the same duration, but different coupons. The initial purchase price would be different, and the price if you choose to trade it mid-life would most likely be different too.
ii) Some bonds are index linked - your return tracks the rate of inflation, rather than being fixed.

HTH

Very informative answer.

coastline

hara____ said:

If your risk tolerance is that low then the only Vanguard options are a) uninvested cash, which I think earns about 2% at the moment or b) their money market fund which earns SONIA, so over 4%

On your question about bonds: sounds like you might find it useful to learn more about interest rate risk and bond duration. Bond funds containing 25-year gilts are high risk. Vanguard give their long duration gilt fund a high risk rating of 6 out of 7.

Not the perfect example but VGOV has an average duration of 14 years. There's still a fair bit of volatility with gilts,bonds etc and way more than people expect.

 Vanguard Funds plc Share Price (VGOV) UK Gilt UCITS ETF GBP | VGOV (hl.co.uk)

This is set to all data from 2012 launch of the fund. Even before covid we've seen short periods of 15% moves. What has alarmed many investors is the collapse in fund prices since 2020 and the rise in rates. I make that 2600 down to 1600 around 35% drop . Like a stock market crash but hasn't got the same chance of recovery. Well if rates go to zero again ?? Yes there's income to add in and the current yield is 2.5% but the fund price is lower than its launch 10 years ago.

Vanguard UK Gilt UCITS ETF, UK:VGOV Advanced Chart - (LON) UK:VGOV, Vanguard UK Gilt UCITS ETF Stock Price - BigCharts.com (marketwatch.com)

From the same chart look at the last year . Around SEPT/OCT prices fell to the lows of the year so around 1600. Then investors viewed this as the peak of rate rises and the fund rallied to 1800 or 15% up. Investors altered their views and fund is now back to similar levels 1600. It shows there's always a chance of a rally and visa versa. If inflation has peaked well there's a reason for a rally or maybe a recession and a cut in rates. What happens to equities though in a slowdown ?
I agree the OP could stick with SONIA or Vanguard cash within the list of funds. Maybe 80 / 20 with the SONIA fund and VGOV. More adventurous 80 SONIA and 20 in the global tracker . Even if the market crashed 50% the 20% allocation would represent a 10% fall in the portfolio. Markets usually recover at the end of the day. To be honest the way SONIA is at present 70 STMMF and 30 global tracker isn't a bad portfolio. Helps you sleep at night.

Chart Tool | Trustnet

Albermarle

eastcorkram said:

Dazed_and_C0nfused said:

Not for me, as my SIPP is with Vanguard (hence the specific question in the post) and, as far as I understand, I can only contribute to ONE SIPP in each tax year

Where have you got that idea from 😳

Don't know where that poster got it from, but I've heard it a few times. Almost as common as needing 35 years for a UK pension.

I have an HL SIPP , company pension goes in via salary sacrifice. I opened one with Fidelity, and pay in random amounts each month. Now, I realise , for the NI , I should really just increase the work contributions, but it suits me to do it the way I'm doing it .

 When this came up in conversation at work, more than one person said I shouldn't be doing that as it's not allowed, and even said if my employer finds out , they'll chuck me out of the work scheme, as you're only allowed one SIPP. 

I assume people are confusing it with the ' you can only contribute to one of each type of ISA each year'