Pension (SIPP), ISAs and Retirement

DRS1

the_medium_bear said:

DRS1 said:

the_medium_bear said:

Albermarle said:

the_medium_bear said:

I am interested in what people think should be a good mix of equities and bonds are for my sipp given my target retirement in about 7 years. Should I be reducing from 100% equities to something like one of the lifestrategy 80 60 or maybe even less 40? Given my age and SIPP pot or keep entirely in equity with the view any dip in the market would recover during early retirement 

Not sure how entirely 'safe' bonds are now given their bad time in the recent past and would lifestrategy give additional protection with it non equities not just being in bonds 

There are many different opinions on asset allocation, but probably most would reduce from 100% equities at your age, but not everybody.
Firstly though do not be too focused on your actual retirement date, as the SIPP will presumably have to last you many years after that.
The recent 'bad time for bonds' was a one off event, probably not to be repeated in our lifetime. The extremely low interest rates in the previous decade boosted their value, but they returned to earth with a bang once rates normalised. So in future they should behave more normally.

yes i was thinking that 100% equities at my age is perhaps a little high, kind of hard to know what percentage would be best 80? or 60? (or less?) was thinking perhaps 60% to allow for growth post actual retirement age (but then maybe 80% is better?) Wondering to myself out-loud here

what the general opinion on having the SIPP pot in something like one of the Lifestratagy mixes (so not having to manage the bond - non equity side myself as im sure fund managers would would do a better job than i could)

also looking at the vanguard target retirement funds (given a retirement year) less risk than a lifestratagy perhaps - well according the the risk rating. 

ideally i would pref bonds in some kind of managed/ fund type pot (kind of a fire and forget, but not closed to the idea of keeping a percentage of sipp as equities fund and then manually choosing bonds/gilts myself for the remaining percentage

would be interested to know opinions on this or just using a lifestratagy / retirement target style of fund. also ultimatly wondering what equities / bonds type allocation people thing would be applicable or wise give my age.

lots of waffle here i appreciate

I was watching a youtube video the other day which said that there could be an issue with buying a single fund in drawdown (whether it is lifestrategy or target).  The issue is that if you are trying to protect against selling equities in a dip then you really need separate funds for the equities and the bonds so you can sell just the bonds.  In a single fund you will be selling both when you sell units in order to draw money out of the pension.

ah that makes a lot of sense and something i had not considered in a lifestratagy / target fund, but can definatly see the rational behing that, so possibly a portion in equities (FTSE 100 global all cap or LS 100) and some in a seperate bonds for when the market is down. 

Any particular recommendations for a bond fund (or self selected bonds like index linked GILTs) 

also what kind of spit with equities/ bonds would you recomend?

Found the video
Best Portfolio Allocation: Asset Allocation By Age
Towards the end he mentions that people in fact keep a lot more in equities as they are older than you might expect.  There is even a graph.
If you were looking at VLS80 then here is a breakdown of its top ten holdings - interesting that there is more than one bond fund. In the video he talks about this and how a global bond fund should be bigger than a domestic one and also the importance of index linked funds.  
Vanguard LifeStrategy 80% Equity Accumulation Fund Analysis
I haven't looked to see if different funds feature in VLS60 or VLS40 or if it is just the percentages which change.
Personally I chickened out of all this and bought an annuity.

Albermarle

the_medium_bear said:

Albermarle said:

the_medium_bear said:

I am interested in what people think should be a good mix of equities and bonds are for my sipp given my target retirement in about 7 years. Should I be reducing from 100% equities to something like one of the lifestrategy 80 60 or maybe even less 40? Given my age and SIPP pot or keep entirely in equity with the view any dip in the market would recover during early retirement 

Not sure how entirely 'safe' bonds are now given their bad time in the recent past and would lifestrategy give additional protection with it non equities not just being in bonds 

There are many different opinions on asset allocation, but probably most would reduce from 100% equities at your age, but not everybody.
Firstly though do not be too focused on your actual retirement date, as the SIPP will presumably have to last you many years after that.
The recent 'bad time for bonds' was a one off event, probably not to be repeated in our lifetime. The extremely low interest rates in the previous decade boosted their value, but they returned to earth with a bang once rates normalised. So in future they should behave more normally.

yes i was thinking that 100% equities at my age is perhaps a little high, kind of hard to know what percentage would be best 80? or 60? (or less?) was thinking perhaps 60% to allow for growth post actual retirement age (but then maybe 80% is better?) Wondering to myself out-loud here.
As I already said opinions vary, there is no black and white best route. At some point you just have to decide.

what the general opinion on having the SIPP pot in something like one of the Lifestratagy mixes (so not having to manage the bond - non equity side myself as im sure fund managers would would do a better job than i could) They make life easy at least and you can not make any huge blunders with them. There are similar alternatives to the Life Staregy funds.

also looking at the vanguard target retirement funds (given a retirement year) less risk than a lifestratagy perhaps - well according the the risk rating. My own personal opinion is that they go a bit too low risk, but maybe Vanguard knows more than I do. 

ideally i would pref bonds in some kind of managed/ fund type pot (kind of a fire and forget, but not closed to the idea of keeping a percentage of sipp as equities fund and then manually choosing bonds/gilts myself for the remaining percentage

would be interested to know opinions on this or just using a lifestratagy / retirement target style of fund. also ultimatly wondering what equities / bonds type allocation people thing would be applicable or wise give my age.

lots of waffle here i appreciate. I would say sensible questions, but as we are dealing with an unknown future, it is not possible to expect firm answers.

Some comments above.

greyteam1959

The OP say in their original post that ' I currently hold ' 75k in Premium Bonds.
The maximum holding is 50k.
So how does that come about ??

masonic

the_medium_bear said:

1-2% over say 10years + RPI/CPIH i guess would only be suitable for a split of the total SIPP as it would reduce the term i could say withdraw 4% from with the anticipated/potential >4% gain (if im correct here?)

I don't think that would be the case. The baseline long term return (15th percentile) for a 100% global equity portfolio is lower than inflation+1%. Drop to 60:40 and baseline return goes up. Remove some risk from the bonds component by liability matching and inflation hedging and you'd likely see an even better baseline return, which would give you a higher safe withdrawal rate. When dealing with shortfall risk and sequencing risk, conventional wisdom about risk and return can be turned on its head.

You can think of it has having a secure foundation to your retirement income that allows some discretion over selling equities at a market low. With that discretion you can actually draw from the portfolio at a higher average rate.

masonic

greyteam1959 said:

The OP say in their original post that ' I currently hold ' 75k in Premium Bonds.
The maximum holding is 50k.
So how does that come about ??

OP mentions possessing a useful tool for breaching such limits: a wife.

the_medium_bear

greyteam1959 said:

The OP say in their original post that ' I currently hold ' 75k in Premium Bonds.
The maximum holding is 50k.
So how does that come about ??

oh i meant i hold 75K between myself and my wife

the_medium_bear

masonic said:

the_medium_bear said:

1-2% over say 10years + RPI/CPIH i guess would only be suitable for a split of the total SIPP as it would reduce the term i could say withdraw 4% from with the anticipated/potential >4% gain (if im correct here?)

I don't think that would be the case. The baseline long term return (15th percentile) for a 100% global equity portfolio is lower than inflation+1%. Drop to 60:40 and baseline return goes up. Remove some risk from the bonds component by liability matching and inflation hedging and you'd likely see an even better baseline return, which would give you a higher safe withdrawal rate. When dealing with shortfall risk and sequencing risk, conventional wisdom about risk and return can be turned on its head.

You can think of it has having a secure foundation to your retirement income that allows some discretion over selling equities at a market low. With that discretion you can actually draw from the portfolio at a higher average rate.

I can see what your saying here, i guess that would leave m with the question of spit between index-guilt and equiry, certainly something to think about over the weekend. 

without having done much digging around (or you tube watching yet) i prersume i can sell a gilt before maturity (just getting what the prices is at that time - maybe more maybe less that origional cost)

the_medium_bear

DRS1 said:

the_medium_bear said:

DRS1 said:

the_medium_bear said:

Albermarle said:

the_medium_bear said:

I am interested in what people think should be a good mix of equities and bonds are for my sipp given my target retirement in about 7 years. Should I be reducing from 100% equities to something like one of the lifestrategy 80 60 or maybe even less 40? Given my age and SIPP pot or keep entirely in equity with the view any dip in the market would recover during early retirement 

Not sure how entirely 'safe' bonds are now given their bad time in the recent past and would lifestrategy give additional protection with it non equities not just being in bonds 

There are many different opinions on asset allocation, but probably most would reduce from 100% equities at your age, but not everybody.
Firstly though do not be too focused on your actual retirement date, as the SIPP will presumably have to last you many years after that.
The recent 'bad time for bonds' was a one off event, probably not to be repeated in our lifetime. The extremely low interest rates in the previous decade boosted their value, but they returned to earth with a bang once rates normalised. So in future they should behave more normally.

yes i was thinking that 100% equities at my age is perhaps a little high, kind of hard to know what percentage would be best 80? or 60? (or less?) was thinking perhaps 60% to allow for growth post actual retirement age (but then maybe 80% is better?) Wondering to myself out-loud here

what the general opinion on having the SIPP pot in something like one of the Lifestratagy mixes (so not having to manage the bond - non equity side myself as im sure fund managers would would do a better job than i could)

also looking at the vanguard target retirement funds (given a retirement year) less risk than a lifestratagy perhaps - well according the the risk rating. 

ideally i would pref bonds in some kind of managed/ fund type pot (kind of a fire and forget, but not closed to the idea of keeping a percentage of sipp as equities fund and then manually choosing bonds/gilts myself for the remaining percentage

would be interested to know opinions on this or just using a lifestratagy / retirement target style of fund. also ultimatly wondering what equities / bonds type allocation people thing would be applicable or wise give my age.

lots of waffle here i appreciate

I was watching a youtube video the other day which said that there could be an issue with buying a single fund in drawdown (whether it is lifestrategy or target).  The issue is that if you are trying to protect against selling equities in a dip then you really need separate funds for the equities and the bonds so you can sell just the bonds.  In a single fund you will be selling both when you sell units in order to draw money out of the pension.

ah that makes a lot of sense and something i had not considered in a lifestratagy / target fund, but can definatly see the rational behing that, so possibly a portion in equities (FTSE 100 global all cap or LS 100) and some in a seperate bonds for when the market is down. 

Any particular recommendations for a bond fund (or self selected bonds like index linked GILTs) 

also what kind of spit with equities/ bonds would you recomend?

Found the video
Best Portfolio Allocation: Asset Allocation By Age
Towards the end he mentions that people in fact keep a lot more in equities as they are older than you might expect.  There is even a graph.
If you were looking at VLS80 then here is a breakdown of its top ten holdings - interesting that there is more than one bond fund. In the video he talks about this and how a global bond fund should be bigger than a domestic one and also the importance of index linked funds.  
Vanguard LifeStrategy 80% Equity Accumulation Fund Analysis
I haven't looked to see if different funds feature in VLS60 or VLS40 or if it is just the percentages which change.
Personally I chickened out of all this and bought an annuity.

many tahnks for this, some bedtime reading and watching here; decission about what to do with my SIPP is becomming muc more involved the more infomation im gathering, appreciate it all though !

the_medium_bear

Albermarle said:

the_medium_bear said:

Albermarle said:

the_medium_bear said:

I am interested in what people think should be a good mix of equities and bonds are for my sipp given my target retirement in about 7 years. Should I be reducing from 100% equities to something like one of the lifestrategy 80 60 or maybe even less 40? Given my age and SIPP pot or keep entirely in equity with the view any dip in the market would recover during early retirement 

Not sure how entirely 'safe' bonds are now given their bad time in the recent past and would lifestrategy give additional protection with it non equities not just being in bonds 

There are many different opinions on asset allocation, but probably most would reduce from 100% equities at your age, but not everybody.
Firstly though do not be too focused on your actual retirement date, as the SIPP will presumably have to last you many years after that.
The recent 'bad time for bonds' was a one off event, probably not to be repeated in our lifetime. The extremely low interest rates in the previous decade boosted their value, but they returned to earth with a bang once rates normalised. So in future they should behave more normally.

yes i was thinking that 100% equities at my age is perhaps a little high, kind of hard to know what percentage would be best 80? or 60? (or less?) was thinking perhaps 60% to allow for growth post actual retirement age (but then maybe 80% is better?) Wondering to myself out-loud here.
As I already said opinions vary, there is no black and white best route. At some point you just have to decide.

what the general opinion on having the SIPP pot in something like one of the Lifestratagy mixes (so not having to manage the bond - non equity side myself as im sure fund managers would would do a better job than i could) They make life easy at least and you can not make any huge blunders with them. There are similar alternatives to the Life Staregy funds.

also looking at the vanguard target retirement funds (given a retirement year) less risk than a lifestratagy perhaps - well according the the risk rating. My own personal opinion is that they go a bit too low risk, but maybe Vanguard knows more than I do. 

ideally i would pref bonds in some kind of managed/ fund type pot (kind of a fire and forget, but not closed to the idea of keeping a percentage of sipp as equities fund and then manually choosing bonds/gilts myself for the remaining percentage

would be interested to know opinions on this or just using a lifestratagy / retirement target style of fund. also ultimatly wondering what equities / bonds type allocation people thing would be applicable or wise give my age.

lots of waffle here i appreciate. I would say sensible questions, but as we are dealing with an unknown future, it is not possible to expect firm answers.

Some comments above.

well you would imagine that Vanduard must have some reasoning behind their choices, maybe just airing on the side of caution though

agree at some point i need to pull some kind of trigger; all the advice is helpfull in making an informed decission though

masonic

the_medium_bear said:

masonic said:

the_medium_bear said:

1-2% over say 10years + RPI/CPIH i guess would only be suitable for a split of the total SIPP as it would reduce the term i could say withdraw 4% from with the anticipated/potential >4% gain (if im correct here?)

I don't think that would be the case. The baseline long term return (15th percentile) for a 100% global equity portfolio is lower than inflation+1%. Drop to 60:40 and baseline return goes up. Remove some risk from the bonds component by liability matching and inflation hedging and you'd likely see an even better baseline return, which would give you a higher safe withdrawal rate. When dealing with shortfall risk and sequencing risk, conventional wisdom about risk and return can be turned on its head.

You can think of it has having a secure foundation to your retirement income that allows some discretion over selling equities at a market low. With that discretion you can actually draw from the portfolio at a higher average rate.

I can see what your saying here, i guess that would leave m with the question of spit between index-guilt and equiry, certainly something to think about over the weekend. 

without having done much digging around (or you tube watching yet) i prersume i can sell a gilt before maturity (just getting what the prices is at that time - maybe more maybe less that origional cost)

Yes, you can sell in the secondary market at any time for whatever is on offer. Real returns are fixed at the point of purchase, but can be pulled forward or pushed outward towards maturity by factors such as interest rates. It could make sense to sell and lock in an early gain if the opportunity presents itself, since future returns would then be capped by the fixed maturity price. It wasn't so long ago, some were priced considerably above the maturity price, offering a negative real return to maturity, but only after soaring in price in the 2010s.