Personal pension or ISA?

Downdog23

Hi, Ive been doing a bit more research and Ive decided I want to start a SIPP using Global index funds with low costs attached and am looking at the Vanguard life strategy and the Vanguard retirement fund portfolios.  I think both are index funds, and the retirement fund moves the balance of holdings to safer bonds as you get closer to retirement where the life Strategy does not. Is this the main difference, does anyone know?

dunstonh

 and am looking at the Vanguard life strategy and the Vanguard retirement fund portfolios.   I think both are index funds

Neither of those are index trackers.  They are multi-asset funds (or fettered fund of funds to be more technical - fettered means they only use their own in-house funds).     The underlying assets are made up of index tracking funds but Vanguard then apply management decisions on the weightings and rebalancing strategy.

the retirement fund moves the balance of holdings to safer bonds as you get closer to retirement where the life Strategy does not. Is this the main difference, does anyone know?

Volatility reduction rather than risk reduction.  Although 95% of the time volatility reduction equates to risk reduction. 2022 and 2023 are years that fell in the 5% where they were more volatile and have lost more than a typical stockmarket crash.

Vanguard is fine.   However, its not the cheapest and it doesn't have the best trackers in all areas.   Its trackers also tend to have higher volatility than many alternatives (possibly down to sampled replication rather than full replication).    Some argue that comparable alternatives offer better value or better returns but at the end of the day, its still a good option for someone that doesn't know what they are doing.     Be wary of risk reduction that you have no control over.   Forced movements to gilts on a fixed diary date basis could lead to worse outcomes.    Statistically, only in around a quarter of cases does volatility reduction result in a better return than no volatility reduction.

Albermarle

Downdog23 said:

Hi, Ive been doing a bit more research and Ive decided I want to start a SIPP using Global index funds with low costs attached and am looking at the Vanguard life strategy and the Vanguard retirement fund portfolios.  I think both are index funds, and the retirement fund moves the balance of holdings to safer bonds as you get closer to retirement where the life Strategy does not. Is this the main difference, does anyone know?

Global index funds are typically following stock markets ( they can follow other things like the bond markets) so are 100% equity/shares.
Neither the Life Strategy funds ( ignoring LS100 as an outlier) or the Retirement funds have a 100% equity. They are a mixture of equity and bonds mainly.

RichardS

@dunstonh what would be the obvious alternatives to Vanguard in this case i.e for someone that does not know much about what they are doing, wants lowish fees but wants less volatility?

dunstonh

RichardS said:

@dunstonh what would be the obvious alternatives to Vanguard in this case i.e for someone that does not know much about what they are doing, wants lowish fees but wants less volatility?

HSBC Global Strategy range is often mentioned as the primary alternative (its cheaper and had better performance - mainly on the back of its asset mix and ability to adjust weightings).  Blackrock also has two ranges with different styles.    Fidelity & L&G are others that are often mentioned but less popular.  AJ Bell is slightly more expensive but has been showing a better track record.

RichardS

@dunstonh thanks. So just to be clear, would the HSBC one you mention be the one linked to here https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-global-strategy-balanced-portfolio-c-accumulation

Downdog23

Albermarle said:

Downdog23 said:

Hi, Ive been doing a bit more research and Ive decided I want to start a SIPP using Global index funds with low costs attached and am looking at the Vanguard life strategy and the Vanguard retirement fund portfolios.  I think both are index funds, and the retirement fund moves the balance of holdings to safer bonds as you get closer to retirement where the life Strategy does not. Is this the main difference, does anyone know?

Global index funds are typically following stock markets ( they can follow other things like the bond markets) so are 100% equity/shares.
Neither the Life Strategy funds ( ignoring LS100 as an outlier) or the Retirement funds have a 100% equity. They are a mixture of equity and bonds mainly.

Thank you, I didn’t understand this about global  index funds. 

Downdog23

Thank you for all your replies, it’s really helpful.  I am looking for a ready made portfolio with low costs and medium risk. I don’t want to choose individual funds myself.