SIPP protection

Veloflyer

Been reading the responses to my previous threads around this topic and some useful stuff - many thanks. I'm all in equities - low cost global trackers essentially - and am looking for ways to protect the SIPP in the event of an equities crash. Some Qs perhaps

Gilts - No experience of investing in these, but is it fair to say that these would offer protection? Are they easy to buy - looking at Bell website, they would seem to have limited selection which looks easy enough to buy over the web? 

Transfer into non-tech ETFs - VHYL or something? It may mitigate the effects of a crash?

Transfer into VLS type funds - my simplistic thinking is the diversification into bonds of some sort may offer some protection but opinion seems to differ here......
  

SVaz

Gilts, well Index linkers,  provide protection for the future. 

You could create a collapsing ladder of guaranteed income for whatever period you choose.
Probably not worth buying pre 2028 ones,  just use a Short term money market fund as a cash buffer. 

I have 5 years income in one as I’m probably retiring in late 2027. 

Then I have a collapsing 5 year gilt ladder starting in 2034.  which means yearly Gilts for those years, haven’t bothered with index linked because I have an index linked military pension. 

Everything else is split between a global index tracker and a mixed asset 70/30 fund. 

SVaz

I will also say that I will only move into Bond funds if I definitely plan to buy an annuity of some sort in my 70’s and then it would be with half my pot. 

Secret2ndAccount

In your other thread I suggested putting 10% into a 5 year gilt, 10% into 10 yr, 10% into...  That's fine, but it gives you a large lump of cash every 5 years, and nothing in between.
What SVaz is talking about is buying, say, 25 gilts, and receiving a payout roughly every year.
It's better than an annuity because if you suddenly need the money, you can sell up and turn it back into cash. If you die, your heirs can do this - the money isn't gone.
It's worse than an annuity because if you are still alive after 25 years, it stops paying...
If you want to play around with the idea, https://lategenxer.streamlit.app/Gilt_Ladder    will work it all out for you.

You need to draw a distinction here - to be clear in your thinking. Is it:
a) I have enough of a pot, and I want to change my investment strategy to a lower proportion of equities to reduce volatility from here forward? or
b) I think there's a crash coming and I want to get out of the market (or tech) temporarily, then go back to equities (or tech) after the crash?

If it's a) then that makes sense, and it might be worth a bit of hassle to build a gilt ladder, since you will be in it for the long term.
If it's b) then would you be good enough to let the rest of us know when the crash has occurred and we have hit bottom so that we can get back in too. There's every chance you will sit in low-return investments while the market continues to climb for up to two years, then miss the best days of the recovery, which can occur within 10 or 15 days of the bottom of the crash. Not sure bonds will work for you here. You don't know when you will want your money back, and even a gilt can lose money if you sell it before its maturity date. There have been times that bonds have gone up as stocks went down. There have also been times when stocks went down and bonds went down too.

Veloflyer

Secret2ndAccount said:

In your other thread I suggested putting 10% into a 5 year gilt, 10% into 10 yr, 10% into...  That's fine, but it gives you a large lump of cash every 5 years, and nothing in between.
What SVaz is talking about is buying, say, 25 gilts, and receiving a payout roughly every year.
It's better than an annuity because if you suddenly need the money, you can sell up and turn it back into cash. If you die, your heirs can do this - the money isn't gone.
It's worse than an annuity because if you are still alive after 25 years, it stops paying...
If you want to play around with the idea, https://lategenxer.streamlit.app/Gilt_Ladder    will work it all out for you.

You need to draw a distinction here - to be clear in your thinking. Is it:
a) I have enough of a pot, and I want to change my investment strategy to a lower proportion of equities to reduce volatility from here forward? or
b) I think there's a crash coming and I want to get out of the market (or tech) temporarily, then go back to equities (or tech) after the crash?

If it's a) then that makes sense, and it might be worth a bit of hassle to build a gilt ladder, since you will be in it for the long term.
If it's b) then would you be good enough to let the rest of us know when the crash has occurred and we have hit bottom so that we can get back in too. There's every chance you will sit in low-return investments while the market continues to climb for up to two years, then miss the best days of the recovery, which can occur within 10 or 15 days of the bottom of the crash. Not sure bonds will work for you here. You don't know when you will want your money back, and even a gilt can lose money if you sell it before its maturity date. There have been times that bonds have gone up as stocks went down. There have also been times when stocks went down and bonds went down too.

Deffo A - as I think I made clear in other posts. I intent to have a cash buffer also - but that is irrelevant to protecting the SIPP.

Albermarle

Veloflyer said:

Been reading the responses to my previous threads around this topic and some useful stuff - many thanks. I'm all in equities - low cost global trackers essentially - and am looking for ways to protect the SIPP in the event of an equities crash. Some Qs perhaps

Gilts - No experience of investing in these, but is it fair to say that these would offer protection? Are they easy to buy - looking at Bell website, they would seem to have limited selection which looks easy enough to buy over the web? 

Transfer into non-tech ETFs - VHYL or something? It may mitigate the effects of a crash?

Transfer into VLS type funds - my simplistic thinking is the diversification into bonds of some sort may offer some protection but opinion seems to differ here......
  

When it comes to investing strategy, there are a lot of different opinions ( not just on this forum) and that is partly at least down to different personality types.
So you are not going to get a definitive answer, and will have to make your own mind up at some point.

For my twopennyworth, it seems a big move to go from a higher risk strategy of 100% equities that you have been happy with for years, to then move in one step to a lowish risk strategy.
The usual route would be to gradually derisk as you get past 50 ( but many do not and conversely many never take enough risk in the first place) but not by too much.

What you are doing effectively is trying to call the top of the market, rather than having a long term strategy as such.
You would not be alone doing that at the moment though. 

Albermarle

Similar thread
Is it time to get some bonds? — MoneySavingExpert Forum

Veloflyer

Albermarle said:

Veloflyer said:

Been reading the responses to my previous threads around this topic and some useful stuff - many thanks. I'm all in equities - low cost global trackers essentially - and am looking for ways to protect the SIPP in the event of an equities crash. Some Qs perhaps

Gilts - No experience of investing in these, but is it fair to say that these would offer protection? Are they easy to buy - looking at Bell website, they would seem to have limited selection which looks easy enough to buy over the web? 

Transfer into non-tech ETFs - VHYL or something? It may mitigate the effects of a crash?

Transfer into VLS type funds - my simplistic thinking is the diversification into bonds of some sort may offer some protection but opinion seems to differ here......
  

When it comes to investing strategy, there are a lot of different opinions ( not just on this forum) and that is partly at least down to different personality types.
So you are not going to get a definitive answer, and will have to make your own mind up at some point.

For my twopennyworth, it seems a big move to go from a higher risk strategy of 100% equities that you have been happy with for years, to then move in one step to a lowish risk strategy.
The usual route would be to gradually derisk as you get past 50 ( but many do not and conversely many never take enough risk in the first place) but not by too much.

What you are doing effectively is trying to call the top of the market, rather than having a long term strategy as such.
You would not be alone doing that at the moment though. 

I am way past 50 at 61 so I am indeed looking to de-risk. Calling the top of the market is not the aim, rather it is to protect what I have. In essence, I believe I have enough and I would like to keep it that way.

Secret2ndAccount

In my view, if you have a lot of your pot in bonds, generating regular, guaranteed payouts, then you don't need much of a cash buffer. More of an emergency fund for a new boiler. Your income is protected from downturns anyway. The cash buffer is what you draw on in an equity crash. If you aren't drawing from equities, you don't need a cash buffer. So you keep a cash buffer that is proportionate to the part of your income coming from equities.
If you went with my plan A - 1 bond every 5 years - you could allow yourself to drift - have a large cash pile when a bond matures, gradually diminishing over 5 years until the next big bond payment comes in.

Veloflyer

Secret2ndAccount said:

In my view, if you have a lot of your pot in bonds, generating regular, guaranteed payouts, then you don't need much of a cash buffer. More of an emergency fund for a new boiler. Your income is protected from downturns anyway. The cash buffer is what you draw on in an equity crash. If you aren't drawing from equities, you don't need a cash buffer. So you keep a cash buffer that is proportionate to the part of your income coming from equities.
If you went with my plan A - 1 bond every 5 years - you could allow yourself to drift - have a large cash pile when a bond matures, gradually diminishing over 5 years until the next big bond payment comes in.

Yes understood. A Bond/gilt ladder could indeed be a wise choice for some of the pot. I guess another advantage is knowing what you will receive. Are these things fairly simple to set up via the SIPP platform? I took a swift look at Bell and it seems fairly straightforward.  

Secret2ndAccount

I think the platforms are wising up to the demand for bonds, and are moving from telephone dealing to online dealing. I bought my bonds on iWeb, and it was the same as buying shares or funds.
Whether buying 25 different amounts of 25 different gilts (and paying 25 fees) is considered easy would be a matter of opinion, but you only have to do it once, then you sit and wait for the money to come in.