more SIPP dilemmas

martin7575

So I have been round the houses attempting to find a solution to invest some cash from my business into a pension before the end of the tax year. starting with no knowledge to something slightly more than that

 Ive had some helpful replies on a previous thread but have found conflicting info around the other reading i'e been doing and am struggling to know what to do.

so far  I have seen an Sjp adviser -  after further reading looked to be expensive and relatively poor performance.

next looked at vanguards target funds  but was made aware of their inflexibility aiming for one particular date.

Then considered an IFA -  I do worry about the long term impact of higher fees but also appreciate the benefits given my experience - in any case with limited funds looks problematic,

Given my fairly straightforward situation I started looking at funds again rather than individual shares - something like aj bell, looks reasonably straightforward, lots of information about performance and taking into account attitude to risk etc I would be happy to follow that route. 

I suppose what im asking is what are the pros and cons of using something like AJ bells balanced fund?  Wanted to get more experienced persons  view before going ahead

thanks

El_Torro

The most important thing is to get investing. Keep dawdling and you’ll find that the tax year is over and you’ve missed out on this year’s allowances. There is such a thing as paralysis by analysis. 

I’m not familiar with AJ Bell’s Balanced Fund. Having a quick look at it now it looks more or less OK. Seems quite heavy on emerging markets for some reason. I think there are better multi asset funds out there. You could certainly do a lot worse though. 

martin7575

thanks @El_Torro I wont miss this years, and I have already put this off way too long.

Thank you for looking up the aj bell fund. I understand you wouldnt want to recommend something specifically but was it just the emerging markets that concerned you? Any other red flags to look out for while im making my last bits of analysis

ColdIron

martin7575 said:

so far  I have seen an Sjp adviser -  after further reading looked to be expensive and relatively poor performance.

SJP are expensive with a very limited range of rather average funds. Bear in mind that part of that fee is for advice (though not independent advice). This has a value and therefore a cost. The consensus is that they are best avoided

next looked at vanguards target funds  but was made aware of their inflexibility aiming for one particular date.

Vanguard do many funds, the target fund was just one of them. They do a LifeStrategy range that is very similar, same construction, same underlying funds, same fees, it just doesn't lifestyle like the target funds. If you liked the target funds but not the lifestyle aspect, they are a straight swap

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds

HSBC do a Global Strategy range with the same objective. It's a little cheaper

https://www.assetmanagement.hsbc.co.uk/en/intermediary/capabilities/multi-asset/hsbc-global-strategy-portfolios

Both allow you to chose your risk level and both are available on a wide range of platforms

Then considered an IFA -  I do worry about the long term impact of higher fees but also appreciate the benefits given my experience - in any case with limited funds looks problematic,

IFAs also give advice and can recommend from the whole of the market unlike SJP who can only recommend from a limited range of in-house funds

Given my fairly straightforward situation I started looking at funds again rather than individual shares - something like aj bell, looks reasonably straightforward, lots of information about performance and taking into account attitude to risk etc I would be happy to follow that route. 
I suppose what im asking is what are the pros and cons of using something like AJ bells balanced fund?  Wanted to get more experienced persons  view before going ahead

Don't go down the individual share route

The VT AJ Bell Balanced fund is just another packaged fund like the two above. It's AJ Bell's in house fund. It's a little more expensive than the other two

All are suitable as a single DIY fund to start building a retirement pot in a SIPP. They all have much the same objective, are diversified and have charges in the same ballpark. Sometimes it can be difficult with such a wide choice available

What most people would do is identify a fund that meets their objective and only then find the best platform to hold it. Not the other way around: find a platform and see what funds they have

artyboy

Part of the problem here is that, aside from wanting to get some tax efficiency out of company funds, it's not clear what your investing objective actually is. You've bounced around from SJP (barge pole...) to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?), and then to an IFA - which may actually be a good investment if you're not sure what you actually want here, or what your attitude to risk is.

For me, I just stick the vast majority in HMWO or a similar global equity fund. My risk tolerance is high as I expect to be invested for the rest of my life and beyond, plus I'm not trying to beat the market. Maybe that's your outlook as well, maybe not...

GeoffTF

artyboy said:

...to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?),

Vanguard's Target Retirement Funds are aimed primarily at people who want to go into drawdown, rather than buy an annuity. (There are no index linked annuities in the US, where target date funds are very popular.) These funds gradually reduce the equity percentage both before and after retirement. The attraction of these funds is that you only have to decide on your likely retirement date and leave the rest to Vanguard. (In contrast, life-styling reduces the equity percentage to zero before retirement, to hedge against changes in annuity prices.)

LHW99

GeoffTF said:

artyboy said:

...to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?),

Vanguard's Target Retirement Funds are aimed primarily at people who want to go into drawdown, rather than buy an annuity. (There are no index linked annuities in the US, where target date funds are very popular.) These funds gradually reduce the equity percentage both before and after retirement. The attraction of these funds is that you only have to decide on your likely retirement date and leave the rest to Vanguard. (In contrast, life-styling reduces the equity percentage to zero before retirement, to hedge against changes in annuity prices.)

I would have said the opposite - Llifestyling is intended to ensure that the fund becomes less sensitive to equity volatility closer to the date you want an annuity (hence people wanting to turn it off). Annuity rates I believe are related to bond yields, so that if bonds go down in actual value, you turn them into an annuity of much the same income level as before the dip.

If you want to drawdown, you don't want too much equity turned into bonds,as you need the likely long term growth that equities are more likely to provide (as you would remain invested over 20-30 years (hopefully)

ColdIron

My traditional lifestyled pension of 25 years with Standard Life was certainly never projected to go down to 0 percent equities at retirement

GeoffTF

LHW99 said:

GeoffTF said:

artyboy said:

...to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?),

Vanguard's Target Retirement Funds are aimed primarily at people who want to go into drawdown, rather than buy an annuity. (There are no index linked annuities in the US, where target date funds are very popular.) These funds gradually reduce the equity percentage both before and after retirement. The attraction of these funds is that you only have to decide on your likely retirement date and leave the rest to Vanguard. (In contrast, life-styling reduces the equity percentage to zero before retirement, to hedge against changes in annuity prices.)

I would have said the opposite - Llifestyling is intended to ensure that the fund becomes less sensitive to equity volatility closer to the date you want an annuity (hence people wanting to turn it off). Annuity rates I believe are related to bond yields, so that if bonds go down in actual value, you turn them into an annuity of much the same income level as before the dip.

If you want to drawdown, you don't want too much equity turned into bonds,as you need the likely long term growth that equities are more likely to provide (as you would remain invested over 20-30 years (hopefully)

Here it is from the horses mouth:

https://www.vanguard.co.uk/content/dam/intl/europe/documents/en/trf-adviser-guide.pdf

Figure 2 shows clearly how Target Retirement Funds work. Some people trust Vanguard's research. Others take advice from anonymous posters on the Internet with nothing better to do (like us). Nobody knows what will work out best, but Vanguard's plan is at least a reasonable one.

dunstonh

Figure 2 shows clearly how Target Retirement Funds work. Some people trust Vanguard's research. Others take advice from anonymous posters on the Internet with nothing better to do (like us). Nobody knows what will work out best, but Vanguard's plan is at least a reasonable one.

Vanguards TR funds reduce the equity ratio by computer whether it is a good time to do so or not.  There is no discretion involved.

Typically, you find that if drawdown is planned and the person is 80%+ equities retirement, then then normally only drop back to around 60%.   If they are already at 60% pre-retirement then most continue on that basis.       

There is a lot of risk using VTR and not understanding how it works and its negatives but there is also a lot of risk investing above your investor behaviour tolerance and capacity for loss.   

Albermarle

LHW99 said:

GeoffTF said:

artyboy said:

...to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?),

Vanguard's Target Retirement Funds are aimed primarily at people who want to go into drawdown, rather than buy an annuity. (There are no index linked annuities in the US, where target date funds are very popular.) These funds gradually reduce the equity percentage both before and after retirement. The attraction of these funds is that you only have to decide on your likely retirement date and leave the rest to Vanguard. (In contrast, life-styling reduces the equity percentage to zero before retirement, to hedge against changes in annuity prices.)

I would have said the opposite - Llifestyling is intended to ensure that the fund becomes less sensitive to equity volatility closer to the date you want an annuity (hence people wanting to turn it off). Annuity rates I believe are related to bond yields, so that if bonds go down in actual value, you turn them into an annuity of much the same income level as before the dip.

If you want to drawdown, you don't want too much equity turned into bonds,as you need the likely long term growth that equities are more likely to provide (as you would remain invested over 20-30 years (hopefully)

It used to be that most traditional pension providers lifestyle funds were aimed at someone buying annuity, so reduced the equity % to zero or close in the last year or two before retirement.
Nowadays you are usually offered a choice of lifestyle options e.g. Annuity; long drawdown; short drawdown etc and the drawdown one is now often the default.
Although it seems from a few posts on here last year, some people are still in the wrong one.

However even with the drawdown ones, they seem to tend to reduce equity further than is probably ideal ( opinions vary )