Late 2025 low risk changes to ISA and SIPP

solidpro

I feel the mood music is shifting and at some point in the next 6-12 months the music is going to stop and as usual, I'll be left without a chair. I'm not looking to time the market, I am looking to move my SIPP and ISAs with HL and Vanguard away from 100% all world Equity which tends to have a US and UK bias.

I really don't know what the best alternative is so I'm thinking of switching everything to VLS40 and sitting on the sidelines for 12 months until the mood music may have changed.

I feel I won't lose sleep out of more ludicous gains I've missed out on, as much as the lost sleep keeping everything at a very high risk factor for the winter ahead (doing nothing).

I have a significant amount of emergency fund, a safe job for at least 3 years but do plan to semi-retire in 3-4 years which would mean relying on ISAs for 7 years (reaching 57 in 11 years from now). At the current level of ISA with 3 years maximum couple contributions we are on track to sustain those 7 years at a little above our current annual living and holiday outgoings.

Does any one have any (kind) suggestions for low-annual-fee switching within HL and Vanguard platforms apart from VLS40 which might just keep up with inflation?

Thanks

El_Torro

You say that you’re not trying to time the market, though that’s exactly what you’re trying to do. Not that it’s something terrible, just that you might as well be honest about it

Since you’re still 11 years away from being able to access your pension it might make more sense to derisk your ISA (at least the part you plan to access in the next 10 years) and leave your pension as it is. 

Personally my ISA is 60% equities and my pension is 80% equities. They’ve been that way for many years. I’m about the same age as you.

To answer your question: A multi asset fund with 40% equities doesn’t sound like a terrible idea for your plan. I’d probably go 60%, especially since you are currently 100% equities. 

masonic

If your objective is to keep ahead of inflation, then you can buy individual index linked gilts at HL which will lock in a return above RPI (CPIH from 2030). You could fund your 'gap' years using these if you buy them with appropriate maturity dates.

If you derisk, then from what you say it wouldn't make much sense to change back after a year or so.

solidpro

I think by not trying to sell high, buy low, I'm not trying to time any 'market'. Feeling I shouldn't leave my chips on the table as the water's coming in through the ceiling on lots of 'markets' when I have the really easily ability to just move stuff to a dry place for a while.

It could be a 1 year change, or forever change. I think the point being it's been on my mind for 6 months and I was waiting to feel better about it and I just feel worse, but whatever I would do, I'd look to make the decision and only even review it after one year.

Linton

True 100% equity world trackers dont have a high UK allocation.  The most common broad funds that do are Vanguard LifeStrategy, but you are planning to go for one.

The most commonly suggested equity/bond funds other than VLS are HSBC's Global Strategy series.  The   GS Conservative fund is 40% equity like VLS40 with the US representing 66% of that equity. UK is about 3%. But you wont get it on the Vanguard platform which only sells Vanguard funds, so you dont have much choice there other than VLS40.

Note that 12 months is not a long time away.  Trump will still, barring some unforeseen event, be President.  If, as some think, the mood music shows deep under-currents the world economy wont be any more stable.

You could go for a portfolio more specifically focussed on your situation, fears, and needs but it would be more complex and probably not possible with a single fund.  So not really justifiable if your timescale is potentially 12 months.

Albermarle

 away from 100% all world Equity which tends to have a US and UK bias.

Normally a 100% equity tracker ( for example) will be around 65% US and 4% UK.

Apart from VLS100, which is 52% US and 23 % UK.

VLS 40 is very similar to VLS100 in that respect.

solidpro

I think I briefly compared the VLS40 to 60 which appeared to up the ante when it came to US equity exposure, which I am trying to avoid, so I stuck with VLS40 as my stake in the ground waiting to be knocked in.

EthicsGradient

solidpro said:

I think by not trying to sell high, buy low, I'm not trying to time any 'market'. Feeling I shouldn't leave my chips on the table as the water's coming in through the ceiling on lots of 'markets' when I have the really easily ability to just move stuff to a dry place for a while.

It could be a 1 year change, or forever change. I think the point being it's been on my mind for 6 months and I was waiting to feel better about it and I just feel worse, but whatever I would do, I'd look to make the decision and only even review it after one year.

Yes, but the point is that you are trying to "sell high" 60% of your portfolio. As said, that's not necessarily wrong, but you ought to be aware it's what you're proposing.

You say "we" (so I guess you and your spouse) will be making another 3 years' maximum contributions to your ISAs. What you could do is put those future contributions into bonds and/or gilts, to build up the amount not in equities, and move a bit out from your existing equity investments each year too - say 15% each year, rather than 60% in one go. That way you really wouldn't be timing the market, but by the time you will be withdrawing from the ISAs, it'll be around the balance you seem to feel comfortable with.

solidpro

Well, in theory the markets always go up in the long term. So I would be selling 'now' which will always be lower than the future. I just can't necessarily bank all our savings on there not being a huge dip in the next 4-11 years...

I have thought about that with future contributions, both to Pension and SIPP.... basically rebalancing as I go, but I think my point is if I don't 'believe' in not losing reasonable percentage in the next 12 months then I'd do nothing. But if I 'believe' then I'd be putting in savings to replace ones that I expected to lose. Seems like a zero sum game/gain....

TheTelltaleChart

Reducing equities from 100% to something less may make sense as you get nearer to retirement, etc. It's the bit about planning to increase the percentage again after a year or years depending on the "mood music" that is more dubious (and the latter is also what I'd call market timing).

I'd ask yourself the question: if I had to pick an equities percentage now, and then stick with it (unless/until my personal circumstances change again), then what percentage would I pick? And then just go to that percentage, and do stick with it.

solidpro

I understand what you're saying @TheTelltaleChart. I think my nuance is that many in their 40s or 50s will essentually have a similar plan to me/us, which is to feed lots into a SIPP at high risk/return because there is generally a decade left before being able to access it. I would intend on accessing it at 57, so I think I'll leave it at 100% equity until I hit 50.

Also many will have an ISA built-up to fill the 'gap' between 57 and whenever retirement is desirable, and if that's less than 5 years away, I don't think it would be sensible to keep the exposure high, as there isn't enough time to ride out a big storm. So I think I'll shift the ISA to VLS40 and leave the SIPP at VWRP for another few years, and try to forget about it all.

The only other query I know nothing about is these Vanguard funds which are built around 'retire in 2030/2035/2040' - do they just gradually de-risk via some kind of admin internally within Vanguard? Seems quite convenient even with the usual VLS UK-bias.