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Managing SIPP in retirement

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  • When I set up my SIPP in 2015 I went down the global tracker route. I thought I could be clever and split the world into distinct regions and buy a vanguard etf to cover each region. This saved me a few quid in fees and would allow some geographical biases if I fancied that.

    Europe exUK
    Asia Pacific exJapan
    USA
    Japan
    Emerging Markets.

    I was about 50% USA when I started. I am now nearer 60%, I have not rebalanced for a few years and USA has been growing faster than all the other regions. Being 50% USA captured the fastest growing market in that time and is reflected in the weightings of my SIPP now.  
    I have modified that plan to make it simpler and reckon on 90:10 developed/emerging. In my ISA I use Vanguard Funds Plc FTSE Developed World UCITS (VEVE)

  • Bostonerimus1
    Bostonerimus1 Posts: 1,386 Forumite
    1,000 Posts First Anniversary Name Dropper
    edited 8 December 2024 at 3:48PM
    AlanP_2 said:
    BobR64 said:
    You don't really need much of a strategy if all you need is 2% plus inflation every year. Just put it in something like VLS80 or VLS60 and sit back. 

    My retirement income needs basically come from pensions and some rental income so I just leave my DC pension money in 85% equities and the rest in a mix of cash and bonds and leave it alone.
    Yes, I guess that was I was hoping - it would be nice to do something simple and sit back!

    I'm not entirely convinced about the VLS funds though as ETFs tend to be cheaper to hold than funds and I am pretty comfortable with sticking to simple global index trackers for the equity component. Also, I understand that VLS tend to weight a bit too heavily towards UK stocks. 

    When you say you have a mix of cash and bonds, what form do you hold the bonds in inside your pension? I think one of the main things I am interested in is to find out what people are doing practically for the bond component.
    I keep a couple of years of spending in the bank and a money market fund for cash flow and emergencies. DB pension and rent cover my expenses. The rest is in three funds; a US equity index; an International ex-US equity index; and a small amount in an income fund that invests in bonds and dividend stocks. The asset allocation is something like 60/25/15. I haven't messed with it for 10 years and it's averaging 10% annual gain. The fees are low and I DIY so no advisor fees. I keep expecting the markets to fall and to have losses, but I don't worry about that because I'm not depending on those funds for income.
    Boston, you always make good points about KISS and passive investing etc. but I think it is worth you pointing out when you specify your investments and returns that you are based in the USA and not the UK.

    60% in a US tracker might be OK for some UK based investors but certainly not all and a UK based investor wouldn't get the same returns (even if invested in "same" funds) as currency movements would have an impact. 
    Yes I'm in the US and my fees are probably a bit lower than they would be in the UK and I have a slight advantage of investing in dollars, but if you are in the UK and invested in VWRP or VWRL you'll also be 60% in US equities and would have an average annual gain of 9.3% over the last decade (that assumes VWRL is tracking it's benchmark). If you'd had a portfolio that was just VLS100 over the last decade you'd have had more of a UK bias and done better with an average annual gain of 10.4%. I'm in a different situation from many retirees because I can invest heavily in equities knowing that my day to day income isn't at risk and of course the last decade had been great for equities so all this success is in hindsight. People approaching retirement without DB pensions might want to be a bit more defensive, but it still doesn't need to be complicated for the investor.
    And so we beat on, boats against the current, borne back ceaselessly into the past.
  • BobR64
    BobR64 Posts: 28 Forumite
    Fourth Anniversary 10 Posts Name Dropper
    incus432 said:

    Like many I got burned by bond funds in 2022 and since learned a vital lesson - that holding bond funds (I held VGOV mainly) is completely different to holding a bond to maturity.  So my inclination now is to hold mainly equities in a global tracker - SWLD or VHVG - and for the 'bonds' component either to buy short term gilts (I never knew till recently you could do this) and hold to maturity or just buy a MMF, on the basis that cash is just as good at reducing volatility as bonds, and much safer. In fact my SIPP pays 3.25 to 3.75% interest on straight cash holdings. Does this make sense?  If not I'd be happy to know!
    I have found Pensioncraft videos useful and also James Shack seems to really know his stuff (if you can keep up with his machine gun delivery). I skip through the promoted sections, I dont think it invalidates the content.
    Thanks for mentioning the PensionCraft videos. These had been amongst the ones I had dipped into before but your post prompted me to go back and I found a couple that were relevant to some of my questions. In particular there was one that explained how bond funds can still be volatile and unpredictable even if they are based on very predictable assets like gilts.

    The PensionCraft chap mentioned that he would hold gilts directly in a pension - perhaps as a ladder - but would not be inclined to hold a fund. I am reasonably comfortable with how gilts work and the practicalities of buying them but less so how to make them work inside a pension.


  • cloud_dog
    cloud_dog Posts: 6,321 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    edited 15 December 2024 at 12:10PM
    @BobR64, are you able to qualify what percentage of your income requirements will be met by the DB(s) and SPs, and any other guaranteed sources?

    For us it works out as c. 80%.

    We are retiring early (about 8 years) and I have a completely different asset/investment allocation for our early retirement pots (as these will completely fund the 8ish years) when compared to the allocation for post DBs / SPs.

    I have time to reassess the post DB/SP strategy but at present I am actually leaning towards simply holding global 100% equity investment(s), with a reasonable contingency (cash / cash like) for those turbulent times.
    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
  • BobR64
    BobR64 Posts: 28 Forumite
    Fourth Anniversary 10 Posts Name Dropper
    cloud_dog said:
    @BobR64, are you able to qualify what percentage of your income requirements will be met by the DB(s) and SPs, and any other guaranteed sources?

    For us it works out as c. 80%.

    In our case it's going to be about 2/3 of our target from guaranteed sources but we aren't skimping on the target. My current SIPP position is somewhat like you in that I'm still heavy on equities (c85%) but have the equivalent of a few years in MMFs held in the SIPP.
  • incus432
    incus432 Posts: 432 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    BobR64 said:
     In particular there was one that explained how bond funds can still be volatile and unpredictable even if they are based on very predictable assets like gilts.

    The PensionCraft chap mentioned that he would hold gilts directly in a pension - perhaps as a ladder - but would not be inclined to hold a fund. I am reasonably comfortable with how gilts work and the practicalities of buying them but less so how to make them work inside a pension.

    I don't remember anyone in the mainstream warning about the volatility of bond funds before 2022.  They were always supposed to be the safe haven that would smooth out equities.

    On gilts, I assume you buy them to provide a fixed income on part of your portfolio for however long you need, and use nominal or IL depending on timescale, and how you feel about inflation risk?  Personally I wouldn't want to fix too far into the future




  • zagfles
    zagfles Posts: 21,384 Forumite
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    incus432 said:
    BobR64 said:
     In particular there was one that explained how bond funds can still be volatile and unpredictable even if they are based on very predictable assets like gilts.

    The PensionCraft chap mentioned that he would hold gilts directly in a pension - perhaps as a ladder - but would not be inclined to hold a fund. I am reasonably comfortable with how gilts work and the practicalities of buying them but less so how to make them work inside a pension.

    I don't remember anyone in the mainstream warning about the volatility of bond funds before 2022.  They were always supposed to be the safe haven that would smooth out equities.

    On gilts, I assume you buy them to provide a fixed income on part of your portfolio for however long you need, and use nominal or IL depending on timescale, and how you feel about inflation risk?  Personally I wouldn't want to fix too far into the future

    Is MSE "mainstream"? There were plenty of people here warning that bonds and gilts were "return free risk" a few years ago. Gilts with a coupon of 0.125% were selling above par! IL gilts with a 0.125% coupon were selling at 300+ clean, over 3x par!

    There was really only one direction they were going to go, and in the meantime you got virtually no return. I avoided bonds & gilts during the times of near zero interest rates, partly due to what I read here and in other places. 
  • incus432
    incus432 Posts: 432 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    zagfles said:
    Is MSE "mainstream"? There were plenty of people here warning that bonds and gilts were "return free risk" a few years ago. Gilts with a coupon of 0.125% were selling above par! IL gilts with a 0.125% coupon were selling at 300+ clean, over 3x par!

    There was really only one direction they were going to go, and in the meantime you got virtually no return. I avoided bonds & gilts during the times of near zero interest rates, partly due to what I read here and in other places.Not 
    Fair enough - I didnt see it. 'Mainstream' to me is newspaper personal finance pages etc. Maybe I missed it there too
  • Bostonerimus1
    Bostonerimus1 Posts: 1,386 Forumite
    1,000 Posts First Anniversary Name Dropper
    edited 16 December 2024 at 4:33AM
    zagfles said:
    incus432 said:
    BobR64 said:
     In particular there was one that explained how bond funds can still be volatile and unpredictable even if they are based on very predictable assets like gilts.

    The PensionCraft chap mentioned that he would hold gilts directly in a pension - perhaps as a ladder - but would not be inclined to hold a fund. I am reasonably comfortable with how gilts work and the practicalities of buying them but less so how to make them work inside a pension.

    I don't remember anyone in the mainstream warning about the volatility of bond funds before 2022.  They were always supposed to be the safe haven that would smooth out equities.

    On gilts, I assume you buy them to provide a fixed income on part of your portfolio for however long you need, and use nominal or IL depending on timescale, and how you feel about inflation risk?  Personally I wouldn't want to fix too far into the future

    Is MSE "mainstream"? There were plenty of people here warning that bonds and gilts were "return free risk" a few years ago. Gilts with a coupon of 0.125% were selling above par! IL gilts with a 0.125% coupon were selling at 300+ clean, over 3x par!

    There was really only one direction they were going to go, and in the meantime you got virtually no return. I avoided bonds & gilts during the times of near zero interest rates, partly due to what I read here and in other places. 
    Held to maturity Gilts and bonds are very low risk...depending on their quality of course. Bond funds sort of remove the initial reason to own bonds ie to lend money at a certain interest rate for an amount of time and then get your principal back. Bond funds introduce the added risk of a market that trades in bonds. Of course most people own bond funds and when interest rates spiked a couple of years ago they saw the value of their bond investments fall. This was particularly bad for those close to retirement who were heavily invested in long term bonds. I also never understood the "defensive" portfolios of many UK financial and pensions companies and sold most of my bond holdings in 2014 as I thought interest rates could only go up. Of course they still had a way to fall, but then they spiked again I'm glad I've been mostly in equity index funds rather than bonds or bond funds over the last decade.
    And so we beat on, boats against the current, borne back ceaselessly into the past.
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