SIPP - Newbie would really appreciate any views please

johngr8000

Hi, this is my first post on here and I really would appreciate any views please. I have a SIPP with HL that has around 250K currently in the cash account. This was setup as it was the preferred way for a company to pay me commission over the past few years and I have done nothing with it. I am 60 years old and probably won't need to draw on this for 5 or 6 years.

I keep looking at moving the cash to investments but I struggle to work out whether I would be best just leaving it in cash. The cash currently earns 3.45% so add on the HL charges of 0.45% and I need to generate growth in excess of 3.9% to make it worthwhile taking any risk. I am pretty risk adverse but I do have another pension with Royal London and enough in Cash ISA's that I can live off if I retire during the next few years.

General advice for newbies seems to be to invest in a global tracker so I have looked at these along with money and dividend type options. I may well be looking at this totally wrong but I have come up with the following places to put the cash and would appreciate any views on whether this sounds sensible options.

Vanguard Life Strategy 60 or 40
HSBC Global Strategy Balanced or Cautious
Royal London Short Term Money Market
Twenty Four Select Monthly Income Fund 

I like the look of the HSBC FTSE All-World Index fund but I think it is probably high risk.

Thank you so much for any views.

Storcko14

I can't advise but I can tell you that I use RLSTMM and a gilt ladder which is my 8 year minimum income floor bridge to State Pension.  The MM fund historically yielded about 4.5 - 5% over the past couple of years (no future guarantees though) and the gilts YTM is similar.  Without knowing more, it sounds like you should try to at least match inflation as if you've been in cash for the last few years your real return (which is what really matters) will have been negative until recently.  Assuming a £250k balance - every 1% less than inflation is costing you £2500 a year in lost purchasing power.

ali_bear

You could spread investment across a number of those funds. Markets are somewhat shaky at the moment, so perhaps its is not the best time to convert all of that cash into shares in one go. 

LHW99

Have you worked out what you would ideally like as a monthly income, and checked if your SP is a full one (read all the page?), hence what your other pensions / savings need to provide?

The Royal London fund is a "close to cash" one, but as those are all funds HL will be more expensive than, say II.

Alternatively you could look at IT's or ETF's, which HL caps it's charges for. However, these are possibly a step too much if you are not used to investments.

Scrounger

johngr8000 said:

Hi, this is my first post on here and I really would appreciate any views please. I have a SIPP with HL that has around 250K currently in the cash account. This was setup as it was the preferred way for a company to pay me commission over the past few years and I have done nothing with it. I am 60 years old and probably won't need to draw on this for 5 or 6 years.

I keep looking at moving the cash to investments but I struggle to work out whether I would be best just leaving it in cash. The cash currently earns 3.45% so add on the HL charges of 0.45% and I need to generate growth in excess of 3.9% to make it worthwhile taking any risk. I am pretty risk adverse but I do have another pension with Royal London and enough in Cash ISA's that I can live off if I retire during the next few years.

You could transfer your HL SIPP to Fidelity, collecting £1,250 cashback in the process, invest in a suitable ETF (eg VWRP, ACWI etc) in order to reduce charges to just £90 per annum (or stay in cash for a while @ 3.05%)

http://www.fidelity.co.uk/transfer/#accordion-d0d6a5a3

Alternatively, by placing your HL SIPP into drawdown, the cash interest rate then increases to 4.05%, and withdrawing 25% tax free cash to spend or invest elsewhere (eg ISA, premium bonds etc).

Again, investing in ETF's at HL reduces the platform fees to £200 pa.


Scrounger

Albermarle

I am pretty risk adverse but I do have another pension with Royal London and enough in Cash ISA's that I can live off if I retire during the next few years.

The key point is that in the long term historically investing has beaten the returns from holding cash. In some periods by a very large margin. As you are only 60 you will on average live another 25 years, and have a good chance of living longer .
Personally I would agree that a global index tracker is a bit racy for a new investor at 60 ( or most investors in fact) 
The options you suggest are not too wide of the mark.
Although if you have a money market fund and cash ISA's , I would not go too cautious with the HSBC and Vanguard multi asset funds. Otherwise your total equity % will get diluted too much.

squirrelpie

johngr8000 said:

Hi, this is my first post on here and I really would appreciate any views please. I have a SIPP with HL that has around 250K currently in the cash account. This was setup as it was the preferred way for a company to pay me commission over the past few years and I have done nothing with it. I am 60 years old and probably won't need to draw on this for 5 or 6 years.

I keep looking at moving the cash to investments but I struggle to work out whether I would be best just leaving it in cash. The cash currently earns 3.45% so add on the HL charges of 0.45%

Stop right there. HL doesn't take any charges if you're holding cash. And they limit charges at £200 per year if you're holding shares or similar. The 0.45% only applies if you hold funds.

20122013

I am on a similar process to OP and I am sure OP is aware that ETF is not FSCS protected but has other advantages ie. you know the exact selling and buying price, which unit trust don't  As my knowledge is limited

I thought I had enough for the rest of my days.. but then it turned out I may have just enough to start investing  6 monoths + to get there so I can understand OP's post, I keep wondering whether I have enough, if so, do I need to risk it to get a bit more? 

 

I will need to invest to get what I need and still wondering about  Global Tracker / HSBC but may choose a different index. Also, need review my Scottish Widow Pension, I was also going to choose a index tracker but now thinking of Vanguard 80/20. I found out that Gilt is available on SW so may look at that as my pension is small.

As I understand if the saving rates are above 4.1% (tax free) then it maybe ok to beat inflation, the problem is that the rate may be lower and that's when you lose 'purchasing power'.