Unitised with Profit with SW vs Vanguard SIPP?

RedDevil1974

Hi everyone, I am hoping to gain some clarity on my pension situation and what to do.
for reference.

• Age 49 (m)
• Hoping to retire at 57
• I have a pension with SW split into 3 pots which I started 24 years ago
• £50k in a unitised with profit fund (returning 2% per year) over last 24 years
• £100k in a SW global equity fund (just moved it here from my unitised with profits fund) as it is performing at 10 - 15% return at present
• £150k in a SW managed Fund.(avr 6% return) over last 24 years.

I have recently opened a SIPP with Vanguard with a North America UCITS ETF fund and a Global All Cap Index Fund.

A bit of background, in Sept last year I spoke to an IFA who suggested that he could place my pension elsewhere for a much better return than the 2% and 6% I was getting. After he consulted with his sign off team he came back to me to say that because I had a unitised with profits fund and they couldn't find out what the final bonus etc would/could be they wouldn't sign off on him transferring the funds for me as his charges would probably negate any gains I made.

So... I opened up the SW Global Equity fund and transferred half from the with profits fund into it. At that point a 44k bonus I had accrued in the with profits was added to my funds and transferred across to the Global Equity fund. 

So I now have a unitised with profits fund with approx 50k in it and a bonus of £900 accrued. I am now only investing monthly into the Global Equity Fund and my managed fund, therefore no more money is going into the with profits fund. 

My question is should I transfer the remaining 50k out of the with profits and into the new vanguard SIPP as the returns are currently much better (I appreciate this could change) however that 50k will just sit there and make 2% per year and my understanding is not build up much more of a bonus. 

My thinking is I have 8 years to make my pot grow as much as possible and ideally have a figure of 750k in my head. (with me investing £2000/2500 pm) so any thoughts?

Sorry if this is long winded and basic questions!

dunstonh

I have recently opened a SIPP with Vanguard with a North America UCITS ETF fund and a Global All Cap Index Fund.

So, a big jump up the risk scale compared to the investments you currently hold.

 After he consulted with his sign off team he came back to me to say that because I had a unitised with profits fund and they couldn't find out what the final bonus etc would/could be they wouldn't sign off on him transferring the funds for me as his charges would probably negate any gains I made.

I suspect that is a misunderstanding.
Some FAs have restrictions on that front but no IFA should.    It is also pretty easy to find out with unitised WPs.

So, either it wasn't an IFA you spoke to but an FA or there are safeguarded benefits, which require a deeper dive and a sign-off by someone with higher regulatory permissions.  Although SW stopped doing GARs after 1995 and you say you bought after that.  So, that seems unlikely and suggests an FA or trainee.

My question is should I transfer the remaining 50k out of the with profits and into the new vanguard SIPP as the returns are currently much better (I appreciate this could change) however that 50k will just sit there and make 2% per year and my understanding is not build up much more of a bonus. 

They will also be much worse when they go down.  Thats the thing with going up the risk scale.   And with the higher US equity content you have, you are looking at around 50-60% loss potential during a large negative period.    Its lovely when it goes up but can you really handle it going down like that?

My thinking is I have 8 years to make my pot grow as much as possible and ideally have a figure of 750k in my head. (with me investing £2000/2500 pm) so any thoughts?

8 years?  Are you planning to spend it all in 8 years time?   If not, then you don't have 8 years.

However, 8 years is moving into short term.  So, being 100% equities with higher tech content with just 8 years could see you do very nicely or it could oblitorate your plans and put you back a decade.

RedDevil1974

Thanks dunstonh when I say I have 8 years I mean 8 years worth of contributions as I plan to stop paying in at 57.

Would you leave as is then spread over 4 funds?

 I chose the riskier vanguard funds as I feel I have sleepwalked for the last 15 years and not paid any attention to my pension performance and need to maximise the gains now or be left with an inadequate amount to allow me to retire early. I get it could back fire and appreciate your comments but 50/60% losses I don’t recall seeing those types of levels in the last 15 years or so and with ai being the ‘next big thing’ i thought this would be a good time to up the ante.

dunstonh

Thanks dunstonh when I say I have 8 years I mean 8 years worth of contributions as I plan to stop paying in at 57.

Are you using drawdown or annuity or combination?   If drawdown, you could be invested for another 25-35 years.   

Would you leave as is then spread over 4 funds?

No.  I suspect there is scope to tidy it up and structure it better 

 I chose the riskier vanguard funds as I feel I have sleepwalked for the last 15 years and not paid any attention to my pension performance and need to maximise the gains now or be left with an inadequate amount to allow me to retire early. I get it could back fire and appreciate your comments but 50/60% losses I don’t recall seeing those types of levels in the last 15 years or so and with ai being the ‘next big thing’ i thought this would be a good time to up the ante.

Coronavirus in 2020 was up to 35% down from peak to trough.     Credit crunch was over 50% down.   Dot.com period was about 43% down.  If you were heavier in tech (as you are now), then a repeat of the dot.com period would see you lose more than the general market.

Tech is boom and bust.  Those that went 100% tech back in the day, lost 90% from peak and it took nearly 15 years to recover.

You could get lucky on the upside. You may not.  You need to consider the downside as it could happen.   Its all about finding a balance.    Are betting it all on red or hedging your bets?

Albermarle

RedDevil1974 said:

Thanks dunstonh when I say I have 8 years I mean 8 years worth of contributions as I plan to stop paying in at 57.

Would you leave as is then spread over 4 funds?

 I chose the riskier vanguard funds as I feel I have sleepwalked for the last 15 years and not paid any attention to my pension performance and need to maximise the gains now or be left with an inadequate amount to allow me to retire early. I get it could back fire and appreciate your comments but 50/60% losses I don’t recall seeing those types of levels in the last 15 years or so and with ai being the ‘next big thing’ i thought this would be a good time to up the ante.

From March 20th 2020, the tech heavy Nasdaq index fell 78% over the following 18 months.

Previous to that there was a lot of wild talk about exciting new developments in internet/tech based business, a bit like with AI now.

To be fair the current big tech companies are a lot more established than they were then, so a drop of this magnitude seems unlikely. However some scary moments are always likely when investing at the riskier end of the scale.
There is no issue with doing this, but just probably best not to put all your eggs in one basket.