more SIPP dilemmas

martin7575

ColdIron said:

martin7575 said:

@coldiron I looked at cautious and moderate which  came out as  55 /45 and 65/35. based on retiring at 60.
was slightly confused (happens a lot!) about adding tax relief as I thought the tax savings came thhrough savings in corporation tax

Sounds about right

All DC pensions paid from after tax contributions give you basic rate tax relief, so 25% from HMRC has been added. But the form of relief will depend upon whether these are employee (taxed) contributions or employer (untaxed) contributions where the relief comes from corporation tax. You will probably know more than me, if not have another look at the link I sent, particularly the Company contributions section. Vanguard will assume these are post tax employee contributions for the purpose of that questionnaire

This is worth a look

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/self-employed

i coudlt see specific reference types of fund - just the equity split....

That they are made up of up to 13 low cost index funds comes as no surprise, the LifeStrategy is constructed in the same way. I wonder if you dig a little deeper (not sure how) would there be mention of lifestyling. The questionnaire allows them to guide you into a suitable fund, much like a robo advisor but it's not really advice and there will be no ongoing advice. You have to wonder what the 0.61% gets you that the 0.37% doesn't

@Coldiron that was my concern. maybe its just a case of unmanaged but one of these funds, just looking for territories and equity /bond ratio

To give you a bit of a steer, the Vanguard LifeStrategy 60 (VLS60) is 60% equities and 40% bonds. This is a popular ratio and not far off many company pension funds. The HSBC Balanced would be its equivalent

london21

hewhohuntselves said:

london21 said:

hewhohuntselves said:

jbrassy said:

In response to the above comments:

Firstly, you should invest in Acummulation funds rather than income funds as you're trying to grow your pot rather than take an income. Accumation funds mean dividends are reinvested.

Second, yes you can invest in multi-asset funds (such as Vanguard Target Retirement), but they often charge higher fees (which are a drag on returns in the long run) and you have less control over what you invest in. They also don't save much time as you only need to rebalance once a year which takes 10 minutes. Further, if you follow my suggested rule of thumb regarding the ratio of equities to bonds, you shouldn't need to spend much time deciding what you should invest in. I'm not completely dismissing multi-asset funds as it's all a matter of preference, but I prefer the more DIY approach.

Third, if you take my approach, you don't need to go down the 'Managed'/'We do it for you' route with Vanguard.

In terms of splitting funds across providers, I only have a small SIPP with Vanguard which is a pension I transferred from an old employer. Therefore I can't really advise on this.

I also saw someone mention that the Vanguard FTSE Global All Cap is 60% US equities and only 4% UK. This is not a bad thing. Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification. UK equities have performed poorly in recent years, which is why diversifying across a wide range of geographies is essential so you're not over-exposed to one country. Second, the US equity market is global in nature. Because it's the biggest equity market, many global companies choose to list in the US, even if they're not US companies, eg Spotify. Second, the largest US companies are global in nature. Companies like Apple and Microsoft make a majority of their sales outside the US. 

Vanguard FTSE Global All Cap Is a good fund and I hold it.  But I think a better option is HSBC FTSE All-World.  It’s cheaper, has better historic performance and is available more widely.

I also currently have Vanguard FTSE Global All Cap tempting that the fees for HSBC FTSE All-World slightly cheaper and the same risk rating of 5.

Tempted to go for UBS S&P 500 Index C Acc but the risk is 6 as I have some ISA funds to invest.

So much choice but important to make a decision that over analyse and do nothing. 

Are those risk ratings really comparable?  I think - but could be wrong - that they are chosen by the fund providers, albeit maybe based on certain uniform criteria.

But more importantly, the S&P 500 fund is a very different beast.  It is not a global fund.  I wouldn’t consider it to be an alternative to the other two.

Thanks will be sticking with Vanguard FTSE Global All Cap (7177 holdings) more diversified than HSBC FTSE All-World (3619 holdings) also the S&P 500 (95.99% US)

I have put in a request to buy the Vanguard FTSE Global All Cap. My original holdings bought last year were 10% cheaper but will average out.

GeoffTF

hewhohuntselves said:

london21 said:

hewhohuntselves said:

jbrassy said:

In response to the above comments:

Firstly, you should invest in Acummulation funds rather than income funds as you're trying to grow your pot rather than take an income. Accumation funds mean dividends are reinvested.

Second, yes you can invest in multi-asset funds (such as Vanguard Target Retirement), but they often charge higher fees (which are a drag on returns in the long run) and you have less control over what you invest in. They also don't save much time as you only need to rebalance once a year which takes 10 minutes. Further, if you follow my suggested rule of thumb regarding the ratio of equities to bonds, you shouldn't need to spend much time deciding what you should invest in. I'm not completely dismissing multi-asset funds as it's all a matter of preference, but I prefer the more DIY approach.

Third, if you take my approach, you don't need to go down the 'Managed'/'We do it for you' route with Vanguard.

In terms of splitting funds across providers, I only have a small SIPP with Vanguard which is a pension I transferred from an old employer. Therefore I can't really advise on this.

I also saw someone mention that the Vanguard FTSE Global All Cap is 60% US equities and only 4% UK. This is not a bad thing. Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification. UK equities have performed poorly in recent years, which is why diversifying across a wide range of geographies is essential so you're not over-exposed to one country. Second, the US equity market is global in nature. Because it's the biggest equity market, many global companies choose to list in the US, even if they're not US companies, eg Spotify. Second, the largest US companies are global in nature. Companies like Apple and Microsoft make a majority of their sales outside the US. 

Vanguard FTSE Global All Cap Is a good fund and I hold it.  But I think a better option is HSBC FTSE All-World.  It’s cheaper, has better historic performance and is available more widely.

I also currently have Vanguard FTSE Global All Cap tempting that the fees for HSBC FTSE All-World slightly cheaper and the same risk rating of 5.

Tempted to go for UBS S&P 500 Index C Acc but the risk is 6 as I have some ISA funds to invest.

So much choice but important to make a decision that over analyse and do nothing. 

Are those risk ratings really comparable?  I think - but could be wrong - that they are chosen by the fund providers, albeit maybe based on certain uniform criteria.

But more importantly, the S&P 500 fund is a very different beast.  It is not a global fund.  I wouldn’t consider it to be an alternative to the other two.

The global tracker is lower risk than the US tracker because it is more diversified.

GeoffTF

ColdIron said:

martin7575 said:

ColdIron said:

martin7575 said:

My only question now is the style of investment with vanguard - one is diy and one is managed. My instinct is managed given my lack of experience but using a single multi asset fund also seems  'managed' im not sure what else is gained?

I'm not sure which fund you are comparing the LifeStrategy with, was it Vanguard's FTSE Global All Cap someone mentioned, the 100% equity tracker?

They are both DIY in as much as you are self selecting and not using an advisor. The tracker is not managed. The LifeStrategy is a managed multi-asset fund so I don't follow your last sentence

You say you are cautious, most people are, and you are starting from 50ish and not 20. Many people on this board have a higher level of understanding and risk tolerance than the man in the street for whom a 100% equity allocation would be way above their risk tolerance. The bonds are there to manage volatility

I don't know you or your circumstances but my strong sense is that you are firmly in multi-asset territory, one of the Vanguard LifeStrategy or HSBC Global Strategy range of funds would suit, particularly as you are just starting out. There are many others but I don't think throwing them into the mix would help

To give you a bit of a steer, the Vanguard LifeStrategy 60 (VLS60) is 60% equities and 40% bonds. This is a popular ratio and not far off many company pension funds. The HSBC Balanced would be its equivalent

Do you remember the old saying that no one ever got fired for recommending IBM? Well a 60/40 fund is a bit like that

The reality is that when starting out, with low sums invested, exactly which fund you choose is not hugely important. Don't forget that you can always change further down the line usually for low on no cost

I also found their attitude to risk difficult to answer, how much would i be prepared to lose every year for 4 years, but it intended to be a longer term investment  and  so the answer is as long as it doesnt evaporate and eventually bounces back im ok with that. instinctively i know im cautious and dont have as many years as many but just found it hard to give confident amounts of loss per year.
https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/investment-choice

Yes those questionnaires can be hard and many people have the same difficulty

One word of warning, that link leads to Vanguard's pension page and while I haven't gone all the way through it I would bet good money that it just filters you down to one of their target retirement funds

thanks again for the great support on this. i'll let you know if it does lead there ! but i was wondering do you think the extra managment is worth it given the types of generic funds being considered? and given we are already discussing specific funds. 

I'm not sure if I'm honest. Vanguard Investor's standard fee is 0.15% for any fund

The DIY option 'fund charges from' is a bit like an optician's 'spectacles from'. At 0.06% you would certainly be using ETFs and be expected to construct your own portfolio. The LifeStrategy fund fee is 0.22% so 0.37% all in

The 'do it for you' option is made up of the standard 0.15%, a fund fee of 0.16 but also a management charge of 0.30% so perhaps I am being uncharitable and they do do more than filter you towards a target fund. Let us know

PS I see where you are getting the DIY and managed terms from now, this makes more sense to me now and makes much of my previous post redundant. Apologies

With Vanguard, the OEIC is sometimes cheaper than the equivalent ETF. Vanguard uses OEICs almost exclusively in its packaged funds. The managed option recommends an equity percentage based on the answers given to a questionnaire. If you are an average Joe, the recommendation is likely to be close to that of the Target Retirement Fund for your expected retirement age.The robo advisors (e.g. Nutmeg) work similarly. They usually have percentage charges, so you could set up a tiny account and see what they recommend.

Albermarle

ColdIron said:

martin7575 said:

@coldiron I looked at cautious and moderate which  came out as  55 /45 and 65/35. based on retiring at 60.
was slightly confused (happens a lot!) about adding tax relief as I thought the tax savings came thhrough savings in corporation tax

Sounds about right

All DC pensions paid from after tax contributions give you basic rate tax relief, so 25% from HMRC has been added. But the form of relief will depend upon whether these are employee (taxed) contributions or employer (untaxed) contributions where the relief comes from corporation tax. You will probably know more than me, if not have another look at the link I sent, particularly the Company contributions section. Vanguard will assume these are post tax employee contributions for the purpose of that questionnaire

This is worth a look

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/self-employed

i coudlt see specific reference types of fund - just the equity split....

That they are made up of up to 13 low cost index funds comes as no surprise, the LifeStrategy is constructed in the same way. I wonder if you dig a little deeper (not sure how) would there be mention of lifestyling. The questionnaire allows them to guide you into a suitable fund, much like a robo advisor but it's not really advice and there will be no ongoing advice. You have to wonder what the 0.61% gets you that the 0.37% doesn't

OP - The 'managed SIPP' option from Vanguard is very new, hence maybe some misunderstandings.

There is a gap in the market for financial advice for people with smaller funds. A FA/IFA will not be interested/too expensive.
Vanguard did offer a separate financial service, that was cheaper than an IFA but less comprehensive. However for some unknown reason they stopped offering it.

The 0.3% ( with no initial fee) gets you very basic assistance in picking a suitable investment. Unlike with an IFA I assume there will be no input about tax issues, or how the pension fits in with your wider financial and family situation.
Probably a very quick review by e mail once a year, with normally no change recommended. 
A lot of people are ignorant/scared of this subject, and probably paying 0.3% is worth it, just to know that at least they are not doing something totally stupid.

Albermarle

ColdIron said:

martin7575 said:

@coldiron I looked at cautious and moderate which  came out as  55 /45 and 65/35. based on retiring at 60.
was slightly confused (happens a lot!) about adding tax relief as I thought the tax savings came thhrough savings in corporation tax

Sounds about right

All DC pensions paid from after tax contributions give you basic rate tax relief, so 25% from HMRC has been added. But the form of relief will depend upon whether these are employee (taxed) contributions or employer (untaxed) contributions where the relief comes from corporation tax. You will probably know more than me, if not have another look at the link I sent, particularly the Company contributions section. Vanguard will assume these are post tax employee contributions for the purpose of that questionnaire

This is worth a look

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/self-employed

i coudlt see specific reference types of fund - just the equity split....

That they are made up of up to 13 low cost index funds comes as no surprise, the LifeStrategy is constructed in the same way. I wonder if you dig a little deeper (not sure how) would there be mention of lifestyling. The questionnaire allows them to guide you into a suitable fund, much like a robo advisor but it's not really advice and there will be no ongoing advice. You have to wonder what the 0.61% gets you that the 0.37% doesn't

OP - The 'managed SIPP' option from Vanguard is very new, hence maybe some misunderstandings.

There is a gap in the market for financial advice for people with smaller funds. A FA/IFA will not be interested/too expensive.
Vanguard did offer a separate financial service, that was cheaper than an IFA but less comprehensive. However for some unknown reason they stopped offering it.

The 0.3% ( with no initial fee) gets you very basic assistance in picking a suitable investment. Unlike with an IFA I assume there will be no input about tax issues, or how the pension fits in with your wider financial and family situation.
Probably a very quick review by e mail once a year, with normally no change recommended. 
A lot of people are ignorant/scared of this subject, and probably paying 0.3% is worth it, just to know that at least they are not doing something totally stupid.

martin7575

Albermarle said:

ColdIron said:

martin7575 said:

@coldiron I looked at cautious and moderate which  came out as  55 /45 and 65/35. based on retiring at 60.
was slightly confused (happens a lot!) about adding tax relief as I thought the tax savings came thhrough savings in corporation tax

Sounds about right

All DC pensions paid from after tax contributions give you basic rate tax relief, so 25% from HMRC has been added. But the form of relief will depend upon whether these are employee (taxed) contributions or employer (untaxed) contributions where the relief comes from corporation tax. You will probably know more than me, if not have another look at the link I sent, particularly the Company contributions section. Vanguard will assume these are post tax employee contributions for the purpose of that questionnaire

This is worth a look

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/self-employed

i coudlt see specific reference types of fund - just the equity split....

That they are made up of up to 13 low cost index funds comes as no surprise, the LifeStrategy is constructed in the same way. I wonder if you dig a little deeper (not sure how) would there be mention of lifestyling. The questionnaire allows them to guide you into a suitable fund, much like a robo advisor but it's not really advice and there will be no ongoing advice. You have to wonder what the 0.61% gets you that the 0.37% doesn't

OP - The 'managed SIPP' option from Vanguard is very new, hence maybe some misunderstandings.

There is a gap in the market for financial advice for people with smaller funds. A FA/IFA will not be interested/too expensive.
Vanguard did offer a separate financial service, that was cheaper than an IFA but less comprehensive. However for some unknown reason they stopped offering it.

The 0.3% ( with no initial fee) gets you very basic assistance in picking a suitable investment. Unlike with an IFA I assume there will be no input about tax issues, or how the pension fits in with your wider financial and family situation.
Probably a very quick review by e mail once a year, with normally no change recommended. 
A lot of people are ignorant/scared of this subject, and probably paying 0.3% is worth it, just to know that at least they are not doing something totally stupid.

May just go with the 'managed' version of vanguard based on recent posts on the lifestyling aspect, im wondering if I should look outside vanguard for something similar. more analysis, more paralysis

martin7575

@ColdIron @Albermarle
just reviewing the sjp information vs vanguards 2035 fund. much higher fees at sjp but actually maybe better performance - although looking at one of the funds reccomended here (vanguard global all cap) - looks more like 50% over 5 years so would be a fair bit better. could i put the whole 41k in this fund through the delf managed side of vanguard? 

ColdIron

martin7575 said:

@ColdIron @Albermarle
just reviewing the sjp information vs vanguards 2035 fund. much higher fees at sjp but actually maybe better performance - although looking at one of the funds reccomended here (vanguard global all cap) - looks more like 50% over 5 years so would be a fair bit better

SJP funds are hard to find details for as they are in house. I can't find those 3 but I would imagine they include dividends reinvested, the Vanguard fund distributes dividends so it's not a like for like comparison

Your first table shows 5 years annualised return so not cumulative. TrustNet shows 63.1% over 5 years. The yield figure is dividends distributed and not total return so not an indicator of performance

https://www.trustnet.com/factsheets/O/ngly/vanguard-ftse-global-all-cap-index

Select 5 years not 3

SJP fees are frequently criticised as being opaque which makes comparisons difficult. Don't forget that SJP charges for advice, which can be valuable, but they recoup that money by taking about 5% (it varies by fund) of the initial sum invested plus 1.50% of the initial investment as a product fee. You would likely spend the first few years catching up. There are also tiered charges from 6% reducing annually for 6 years if you leave early

https://www.sjp.co.uk/charges/pensions-charges

The chances of a mixed asset fund from one of the most expensive firms in the country being cheaper and having better returns than a cheap 100% equity tracker once you take all the extra overheads into account are, I would suggest, remote

Edit: replaced all world link with all cap

martin7575

@coldiron its difficult to make comparisons but thanks for the clarification, I just wanted to check before nocking that on the head so that is helpful.

Given that the vanguard all cap is well reccomended do you see any value in  a managed service form Vanguard ( as opposed to just putting everything in that fund unmanaged) . I also looked at pension bee for simplicity.

at least sjp firmly out of the picture