Managing SIPP in retirement

bjorn_toby_wilde

Like the OP I find bonds tricky to understand. Not the concept, but how to add them to a SIPP.

Does one buy individual bonds/gilts or is it better to purchase a bond fund?  It seems easier in many ways to buy a lifestrategy type fund where the mix is set for you.

Linton

BobR64 said:

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- Does the fact that I have a reasonable DB component and a relatively low required withdrawal rate reduce the need for bonds in the SIPP? (Even if my SIPP crashed 50% it would only mean my withdrawal rate would go up to 4%.)
- If it would be advisable to have a bond component:
   -- How do I decide what percentage?

   -- What form does this actually take? Do I buy bond funds/ETFs or am I buying gilts within my SIPP? If funds, what sort of thing am I looking for?

- Do I follow a three bucket strategy, with cash as well as bonds?

- What are the rules for rebalancing, particularly with regard to timing?

......

Your allocation to equity, bonds and and anything else you choose to invest in should be what it needs to be to implement your strategy and meet your objectives.  You cannot go much further unless you do have objectives and a strategy.

 I use a 3 bucket strategy (long term growth, income, and short term close to cash) with  each bucket having a totally different asset allocation dependent on its purpose.

The only bonds I hold are higher risk corporate and EM government bond funds which provide high interest..  The income bucket is about 50% such bonds and 50% equity.  All income funds and ITs are active as passive funds  do not meet the yield requirement.

The long term growth bucket is 100% equity with  a mixture of tracker ETFs and active funds. ITs could be used but are not at the moment. Each investment is chosen to best meet a specific purpose within the growth portfolio as a whole.

There is no fixed rebalancing between buckets.  The income bucket is the size it needs to be to generate the income I want, the short term bucket contains sufficient cash to meet all ongoing and one-off expenditure needs in the next 5 years or more and the rest goes into long term growth.  All income from the income portfolio goes into the short term bucket.  I review the bucket sizes once a year and move money around if required to meet the objectives.

Market timing is never a factor.  I normally implement any changes required around the start of the financial year.

That is what I do.  I cannot say what you should do as I dont know your circumstances, risk acceptance, objectives, investment experience and willingness to learn etc.

BobR64

Linton said:

 Your allocation to equity, bonds and and anything else you choose to invest in should be what it needs to be to implement your strategy and meet your objectives.  You cannot go much further unless you do have objectives and a strategy.

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That is what I do.  I cannot say what you should do as I dont know your circumstances, risk acceptance, objectives, investment experience and willingness to learn etc.

Thank you for this. It is very interesting to hear concrete details of your strategy.

I think you are correct that I do need a strategy and that is in many ways what I am struggling with. How do I acquire the necessary knowledge so that I am in a position to devise a strategy? I am certainly willing to learn but am unsure about how to go about doing it effectively, and that was why part of my question was to ask for recommendations for resources. Having said that, I already feel as if I have been getting some great advice here and have a few leads to follow. Perhaps as someone else mentioned I could do worse than spending time reading this forum and asking questions as appropriate. 

BobR64

bjorn_toby_wilde said:

Like the OP I find bonds tricky to understand. Not the concept, but how to add them to a SIPP.

Does one buy individual bonds/gilts or is it better to purchase a bond fund?  It seems easier in many ways to buy a lifestrategy type fund where the mix is set for you.

Let's see if there is any more life in the current thread, but this feels like it might be a good candidate for a new top-level post. It's one aspect of what I was interested in but it might be better to ask it as a more focused question. I am guessing that there are a range of approaches that people take and it would be interesting to ask what they are and what their reasons are.

BobR64

Albermarle said:

My error, it is VLS 20.

Sorry - I had already made the same error in mentioning LS80, which might have led you astray.

Moonwolf

My position is similar but I have spent a few years reading this forum, which has given me a little more confidence.  Although I have to say, I have just started the ball rolling for next March, I'll be 59, and I am starting to get nerves.

I will have, once I reach 67, enough DB income for a pretty good lifestyle.  The extra DC drawdown will cover more or nicer holidays and a newer car, tech etc.  I actually have a plan that has my DC pot running out at 90 at 2.5% growth, at 85 at an average of 2% and a very big market crash in the next two years could have me running out by 75-80 if I don't make adjustments.  I can live with this risk.  I have a 1-2 year cash buffer in ISAs which I'll only touch if I have to.

As a result I've decided to leave most of my pension pot in the same tracker funds they are now, this means I have mostly equities which would be far too risky if I needed my DC income to survive.  I have considered gilt ladders or fixed annuities to protect me in the bridging period; or taking DB early with reduction to preserve my DC pot for higher growth, and I have decided that they are complicated or don't give enough benefit for the changes in risk.

Do you have enough DB income to maintain an acceptable lifestyle?  If so, do you need to be very cautious? Also, do you need to make things complicated?  If you are happy with the risks at the moment, is there a huge benefit to embarking on a complex plan that you don't feel you understand?

MK62

Part of the problem there is that what seems simple to some, could seem very complex to others, so if you have a partner/spouse you might have to take that into consideration........and it might mean implementing a plan quite different to the plan you'd choose if there was just yourself to consider (which obviously depends on the partner)........or it might not!

Yet another thing to ponder over......

MallyGirl

MK62 said:

Part of the problem there is that what seems simple to some, could seem very complex to others, so if you have a partner/spouse you might have to take that into consideration........and it might mean implementing a plan quite different to the plan you'd choose if there was just yourself to consider (which obviously depends on the partner)........or it might not!

Yet another thing to ponder over......

My husband has already said that, if he was to survive me, his first step would be to simplify everything as he is not interested in becoming knowledgeable enough to run the finances as they are today. I have taken that onboard and will adjust a bit once in retirement. Just got to get him to agree to retire which he is still not happy about!

bjorn_toby_wilde

A very good point @MallyGirl. I’m happy with the state of my finances but I’m certain she who must be obeyed would have no interest in managing things in the way I do.

Something to ponder.

kempiejon

bjorn_toby_wilde said:

A very good point @MallyGirl. I’m happy with the state of my finances but I’m certain she who must be obeyed would have no interest in managing things in the way I do.

Something to ponder.

SO is 10 years younger than me and disinterested. They have good earning potential, doesn't have my early retirement desire. I'll retire long before they do. I am building an investment portfolio that replaces my income and hopefully it can be ignored - dividends will pump out, bond fund holdings can be sold down to supplement down years or fritter away and for any indulgences. They'll be self sufficient from their own pension I think so it doesn't matter if the income fluctuated or if the funds are all liquidated. I am not making a plan for my predeceasing them just yet. That and a bit of management instruction for the investment will come later.