Pension (SIPP), ISAs and Retirement

the_medium_bear

masonic said:

the_medium_bear said:

So brief look at index linked gilts. I took a looks at this:

https://www.hl.co.uk/shares/shares-search-results/t/treasury-0.25-31072031-gilt

And my question here

If I'm reading that link correctly and brought this this at £81.77 (which would mature in 2031 at a value of £100) 

I would essential maybe 18.23% over 6 years guaranteed if held to maturity on top  of this I would get 0.25% so that would be 3.28% per year + inflation 

Am I reading this data right? Or is my assumption correct here (I will read the links posted in previous comments when I have a bigger screen

And going forward I could have multiple of these maturing on subsequent years to drawn on 

That is not an index linked gilt, so you would get an overall return of about about 3.8% total. If inflation were 3% over that period, it would just be inflation + 0.8%, but if inflation was higher or lower the outcome would be relatively worse/better in real terms.

TR31 is the index linked gilt with closest maturity, and that has an overall return of inflation + 0.95%.

For TR31, the clean price is £95.36, but this excludes index linking and accrued interest. What you'd actually pay is £132.46. It will mature with a clean price of £100, but what you'll actually receive is the dirty price (including all index linking) at that time, so could be £150+ (plus all of the 6 monthly interest payments from purchase to maturity). See https://www.dividenddata.co.uk/gilts.py?ticker=TR31

Ah I could have sworn I thought that was index linked, maybe I spend too much time looking at this

Understand about clean Vs dirty price not sure how what calculation you used to get from 132 to mature at £150+ was that an estimate of inflation?

masonic

the_medium_bear said:

Understand about clean Vs dirty price not sure how what calculation you used to get from 132 to mature at £150+ was that an estimate of inflation?

That was based on RPI being around 3%. Can't see it being lower than that, but a good chance it will be even higher. Edit: actually I didn't account for the current price being below par, so it would actually be about £160 if RPI was 3% (i.e. index ratio rises from its current level of 1.39 to 1.6).

the_medium_bear

So in essence I'm getting inflation+ 0.95% so I'm in real terms getting 0.95% equity increase at the end of the day

masonic

the_medium_bear said:

So in essence I'm getting inflation+ 0.95% so I'm in real terms getting 0.95% equity increase at the end of the day

Yes, that's right.

the_medium_bear

Thanks so much. So basically coupon price is what I should really care about (as the index part just negates the of valve due to inflation) 

If I sold before maturity the return could differ based on dirty price which maybe higher or lower than that purchase price

Just wondering in this case if there is an advantage of holding to maturity 

(Sorry about all the questions just want to be 100% sure I understand this)

DRS1

HL have a list of Index Linked Gilts here
Index linked gilts | Hargreaves Lansdown
Or you could look at this
Gilts in Issue - giltsyield.com

Personally I buy gilts (only 1 or 2) outside an ISA/SIPP so I tend to look for ones with a low coupon.  Of course if you are buying in a SIPP/ISA then you don't need to worry about the income tax on the coupon.

masonic

the_medium_bear said:

Thanks so much. So basically coupon price is what I should really care about (as the index part just negates the of valve due to inflation) 

If I sold before maturity the return could differ based on dirty price which maybe higher or lower than that purchase price

Just wondering in this case if there is an advantage of holding to maturity 

(Sorry about all the questions just want to be 100% sure I understand this)

You need to take into account both the current clean price and the coupon. If the clean price is below £100, then that will contribute to your return (and if above £100 it would reduce it). In some cases, almost all of the return comes from the price rising to £100, and little from the coupon. It is possible to achieve a lower return or even a loss if you sell before maturity, but under different circumstances you could achieve a larger gain. You should be able to hold to maturity in order to remove this risk, but you don't have to if you can sell early for a favourable price.

the_medium_bear

wow thats lots of reading I have done over the weekend and thanks for everyone recommendations. I was kind of considering a VG LS 60/40 however one of the previous posters pointed me a video stating that withdrawing from this in a downturn would mean im also withdrawing equities that would have also declines as there is no separation.

to avoid this I was thinking keeping a 100% equity tracker (perhaps LS100 or FTSE global all cap) but only with 60% of my SIPP have and then having a 40% bond tracer of some form, there for being able to choose which fund to take money from depending on market conditions

from what i can see there is no indexed fund that kind of tracks what the "bonds" porting of a LS split on equities/ bonds does - was really looking for a index here that did not require any maintenance, like the3LS100 did during capital growth.

Vanguard Total Bond Market ETF (BND) - (dont think this can be put into a SIPP + is seems USD weighted) or a global aggregate bond fund  ETF

just wondering what people here thing about this, i would rather have a couple of funds because I dont think i would have the knowledge to do all of this myself - looked at GILTS and am not sure that i have my head around them 100% and looked at 'ladder GILTS' too, again this will require lots of fettling i think

dunstonh

wow thats lots of reading I have done over the weekend and thanks for everyone recommendations. I was kind of considering a VG LS 60/40 however one of the previous posters pointed me a video stating that withdrawing from this in a downturn would mean im also withdrawing equities that would have also declines as there is no separation.

Research has shown that in the majority of periods, not having a cash float or bucketing is the best option.   However, it's the minority of periods where the damage is done.  Hence why cash floats and bucketing are better options.

to avoid this I was thinking keeping a 100% equity tracker (perhaps LS100 or FTSE global all cap)

VLS100 is not a tracker.  It is a global managed fund.  The underlying investments are trackers but there are managed decisions on asset weightings and the fact it is fettered.   Vanguard doesn't have the best trackers in all areas.  Using a fettered fund means it will only use Vanguard trackers.

from what i can see there is no indexed fund that kind of tracks what the "bonds" porting of a LS split on equities/ bonds does - was really looking for a index here that did not require any maintenance, like the3LS100 did during capital growth.

Vanguard doesnt have a VLS00, which would possibly be more useful than VLS100 as it would give a basket of different bond types.   Some people will go with Vanguard global bond GBP hedged although a mix with short term and STMM would be better.

DRS1

If you're wedded to Vanguard why not just use the bond funds they use in VLS60?