Vanguard Life Strategy

MetaPhysical

When we mention cash buffer I also mean having two years' of SIPP withdrawals in actual cash inside my SIPP - not invested in anything, not even MM funds which can in theory still crash in some situations - they would have crashed in the Liz Truss financial event had the BoE not stepped in..  I know that is a drag on growth only earning 3% but I can sleep at night.  I keep two years actual cash and three years of MM funds.  This comprises 25% of my portfolio's value. The other 75% is a mix of gilts in a gilt ladder, HY bonds, bond funds and equites.

tigerspill

MetaPhysical said:

When we mention cash buffer I also mean having two years' of SIPP withdrawals in actual cash inside my SIPP - not invested in anything, not even MM funds which can in theory still crash in some situations - they would have crashed in the Liz Truss financial event had the BoE not stepped in..  I know that is a drag on growth only earning 3% but I can sleep at night.  I keep two years actual cash and three years of MM funds.  This comprises 25% of my portfolio's value. The other 75% is a mix of gilts in a gilt ladder, HY bonds, bond funds and equites.

Nothing wrong with a cash buffer in my view.  I am trying to have 5 years in actual cash and accept the inflation risk.  I am trying to sort out a sort of gilt ladder for the 5-10ish time frame. 

MetaPhysical

tigerspill said:

MetaPhysical said:

When we mention cash buffer I also mean having two years' of SIPP withdrawals in actual cash inside my SIPP - not invested in anything, not even MM funds which can in theory still crash in some situations - they would have crashed in the Liz Truss financial event had the BoE not stepped in..  I know that is a drag on growth only earning 3% but I can sleep at night.  I keep two years actual cash and three years of MM funds.  This comprises 25% of my portfolio's value. The other 75% is a mix of gilts in a gilt ladder, HY bonds, bond funds and equites.

Nothing wrong with a cash buffer in my view.  I am trying to have 5 years in actual cash and accept the inflation risk.  I am trying to sort out a sort of gilt ladder for the 5-10ish time frame. 

Wise.  Have you used the Gilt Ladder tool?
https://lategenxer.streamlit.app/Gilt_Ladder

It is very powerful and you can build all manner of scenarios.

tigerspill

MetaPhysical said:

tigerspill said:

MetaPhysical said:

When we mention cash buffer I also mean having two years' of SIPP withdrawals in actual cash inside my SIPP - not invested in anything, not even MM funds which can in theory still crash in some situations - they would have crashed in the Liz Truss financial event had the BoE not stepped in..  I know that is a drag on growth only earning 3% but I can sleep at night.  I keep two years actual cash and three years of MM funds.  This comprises 25% of my portfolio's value. The other 75% is a mix of gilts in a gilt ladder, HY bonds, bond funds and equites.

Nothing wrong with a cash buffer in my view.  I am trying to have 5 years in actual cash and accept the inflation risk.  I am trying to sort out a sort of gilt ladder for the 5-10ish time frame. 

Wise.  Have you used the Gilt Ladder tool?
https://lategenxer.streamlit.app/Gilt_Ladder

It is very powerful and you can build all manner of scenarios.

I have looked at it.  
I have spent the last few weeks (as you can see from my posts) trying to better understand ILGs to see if I should move some of my investments to these.  With the help of those on here, I think I now know enough to actually do this in the next days / weeks.  That GL tool looks very helpful.
Thanks

tigerspill

MetaPhysical said:

tigerspill said:

MetaPhysical said:

When we mention cash buffer I also mean having two years' of SIPP withdrawals in actual cash inside my SIPP - not invested in anything, not even MM funds which can in theory still crash in some situations - they would have crashed in the Liz Truss financial event had the BoE not stepped in..  I know that is a drag on growth only earning 3% but I can sleep at night.  I keep two years actual cash and three years of MM funds.  This comprises 25% of my portfolio's value. The other 75% is a mix of gilts in a gilt ladder, HY bonds, bond funds and equites.

Nothing wrong with a cash buffer in my view.  I am trying to have 5 years in actual cash and accept the inflation risk.  I am trying to sort out a sort of gilt ladder for the 5-10ish time frame. 

Wise.  Have you used the Gilt Ladder tool?
https://lategenxer.streamlit.app/Gilt_Ladder

It is very powerful and you can build all manner of scenarios.

So I have had a first look at this gilt ladder tool.  I have kept the defaults of needing £10,000 per year for the next ten years.  I have pasted the table below.

In summary, I think that this means that in total, I will pay £95,417 in today's money.  And in return I will each year, receive £10,000 plus the RPI increase plus the coupon year on year from now to maturity for each ILG.
One anomaly seems to be T301 where the cost is higher than the nominal £10,000, but I assume that the theory is the larger coupon makes up for this?

I think the GRY column is Gross Redemption Yield and is the real return - i.e. above inflation (including coupons).  Is this right?

Storcko14

One problem with an ILG ladder vs a annuity that I'm struggling with is that when I look at the cashflow of my chosen ladder, I'm seeing significant cash balances after each redemption (obviously).  Assuming that cash is left as is to pay my pension income, it's a) exposed to inflation and b) earning platform cash interest rates which currently are below inflation.  How's that better than an annuity or just leaving it in a STMM fund?  Am I missing something?

MK62

Not missing anything as such........periodically producing an index linked lump sum of cash is what the ladder is designed to do.........if you need that cash to supplement your income in the near term, withdraw it (accounts are available which currently pay > inflation)....if not, reinvest it (MMF, another gilt etc, depending on the timeline of needing to withdraw).

SVaz

I think it’s better than an annuity because of the total flexibility.
You can sell part/ whole of the Gilts if circs change,  terminal illness etc. 
You don’t have to take the income if it’s not needed, so saving tax.  Annuities are paid and taxed with no choice in the matter. 
It can be inherited flexibly too,  with the beneficiary deciding what to do with it. 

Veloflyer

tigerspill said:

MetaPhysical said:

tigerspill said:

MetaPhysical said:

When we mention cash buffer I also mean having two years' of SIPP withdrawals in actual cash inside my SIPP - not invested in anything, not even MM funds which can in theory still crash in some situations - they would have crashed in the Liz Truss financial event had the BoE not stepped in..  I know that is a drag on growth only earning 3% but I can sleep at night.  I keep two years actual cash and three years of MM funds.  This comprises 25% of my portfolio's value. The other 75% is a mix of gilts in a gilt ladder, HY bonds, bond funds and equites.

Nothing wrong with a cash buffer in my view.  I am trying to have 5 years in actual cash and accept the inflation risk.  I am trying to sort out a sort of gilt ladder for the 5-10ish time frame. 

Wise.  Have you used the Gilt Ladder tool?
https://lategenxer.streamlit.app/Gilt_Ladder

It is very powerful and you can build all manner of scenarios.

So I have had a first look at this gilt ladder tool.  I have kept the defaults of needing £10,000 per year for the next ten years.  I have pasted the table below.

In summary, I think that this means that in total, I will pay £95,417 in today's money.  And in return I will each year, receive £10,000 plus the RPI increase plus the coupon year on year from now to maturity for each ILG.
One anomaly seems to be T301 where the cost is higher than the nominal £10,000, but I assume that the theory is the larger coupon makes up for this?

I think the GRY column is Gross Redemption Yield and is the real return - i.e. above inflation (including coupons).  Is this right?

I like it.......and the advantages that SVaz points out. Well worth considering I feel. Out of interest, where did you/would you buy the gilts and is it easily done over the internet? Bell?  

Stupid Q perhaps - how is the 10K per ann arrived at when the ILG matures?

Veloflyer

Sorry - I'll modify that last comment. I did look at the gilt ladder cashflow and coupons....It is more an inquiry as to understanding how the the redemption price of the ILG is calculated as per the cash flow on the gilt ladder link.