SIPP Portfolio Advice needed please

DottedEight

I am 66 years old, wife is 64 years old, we are both retired

I am on full state pension, and have a small private pension

Wife won't qualify for state pension until 2029

She also has small private pension.

We have joint savings of around £200,000

I plan to draw £15,000 from the above savings over next 2 years to supplement our joint income until wife qualifies for state pension.

We have no debt, no dependants, and low outgoings.

I also have an AJ Bell SIPP of £114,000

My portfolio consists of these 5 funds

HSBC ftse world index c acc

L&G US index I Acc

Vanguard Ftse Dev World ex-uk eq idx £ Acc

Vanguard Ftse global all cap idx £ Acc

Vanguard Lifestrategy 80% Equity A Acc

This portfolio has grown by approx 44% over 5 and 1/2 years.

Due to my income from state and private pensions, we will not actually "need" the SIPP, and intend to leave it alone to grow and become a safety net for the future.

I typed all of this into AI, and it congratulated me on my management of finances, but suggested rather alot of overlap across the funds in my portfolio, and suggested selling down all 5 of the funds and buying Vanguard FTSE All World UCITS ETF (VWRP) It says this will give me all the funds I previously have but this ETF will save money in AJ Bell fees as their is a cap on ETF's ( saving approx £100 per annum)

I recently read some posts on this very forum, suggesting funds which invest in US companies is likely to be more volatile then ever before over the next years.

I know that my present portfolio carries a large exposure to US markets too, which was what I wanted.

So my SIPP portfolio is intended as a leave alone to grow safety net for future years, I am also mindful that according to life expectancy averages I have approx 20 years left , wife a little longer, so don't want to die rich, so maybe we should look at  not touching this Sipp fund for another 12 years, we certainly won't need to until then.

Not sure what to do here

1. Do i shift all the portfolio into Vanguard FTSE All World UCITS ETF (VWRP) as AI suggested?
2. If so is 12 years a good time frame for an equity only fund given our ages and timeframe?

 3) Is the US biased tech based fund advisable?

1. £150,000 savings are all in cash isa's, remaining £50,000 in fixed savers, but I intend to put £35,000 of this into stocks & Shares ISA's I will mirror whichever fund I choose for my SIPP

I would appreciate any advice thanks, my major concern is what I've been reading about new fears of the US tech based funds in the future.

Thanks in advance.

aroominyork

You have read about possible risks of being overweight to the US and the tech firms. It is now your choice whether to respond to those, using a starting point of a global cap weighted fund - either the first or fourth on your list. There is certainly overlap; for example, ignoring the small bond element of VLS80 you are overweighting the UK in that fund but underweighting it in the ex-UK fund.

If the SIPP is a safety net (rather than, for example, an inheritance fund you are unlikely to touch), then 100% equities is risky. In your position I would want part of my safety net not to be prone to a crash.

Linton

Given you have no plans to touch the money for 12 years the suggestion to move it all into FTSE All World is very sensible in my view. All your current global funds will hold much the same companies with about 60%-70% US. Then you are adding even more with your L&G US fund holding large US companies which will also be held by your global funds. Too many eggs in one basket?

Even just holding the FTSE World Index you should expect some significant volatility with perhaps a temporary fall of 40% at some point in your 12 years. However with your large cash holding this should not affect your short/medium term standard of living. However, depending on your psychology you may find such a fall difficult to accept.

DottedEight

https://forums.moneysavingexpert.com/discussion/comment/82075092#Comment_82075092

Thankyou for your input, I think what I might do as I approach the end of my plan to invest all into Vanguard FTSE All World UCITS ETF (VWRP) I will possibly invest in govt bonds etc in a glidepath after 8 years.

dunstonh

I recently read some posts on this very forum, suggesting funds which invest in US companies is likely to be more volatile then ever before over the next years.

They have already been more volatile,but in an upward direction. Technology is one of the most volatile business sectors. Technology now makes up over a quarter of many global trackers. During the last technology crash, tech stocks fell 90% from peak to trough and the technology sector took over 12 years to recover.

It doesn't mean that technology is going to crash in a similar way going forwards. Technology has significantly outperformed the wider market, and many consider it in a bubble. Bubbles typically go on to burst at some point.

As you've read the other thread, you will know that a number of posters are still using index trackers but tilting their equities ratio away from US a little. Often bringing it closer to its long-term average.

Do i shift all the portfolio into Vanguard FTSE All World UCITS ETF (VWRP) as AI suggested?

If so is 12 years a good time frame for an equity only fund given our ages and timeframe?

100% equities for a 12-year time scale is a bit high risk. Although you are not going to draw it all out in 12 years' time. So much of it will be there longer. Phasing the risk down to reduce your equity content is something that would be prudent, and many people use 10 to 15 years as the starting point to reduce their risk.

3) Is the US biased tech based fund advisable?

It's a judgement call based on your tolerance to volatility and loss.

FT8

Here are my thoughts:

• It sounds like your income needs are met by another pension and the state pension.

• £200,000 is a lot to have in savings. Its purchasing power will reduce in time.
  • Do you know how much you will need in the coming years apart from the £15,000?
  • I would consider investing some / most of this money.
  • Short-term gilts may be a good option if you think you may need some of the money in the next few years. Low coupon short-term gilts are tax efficient.
    • Qualifying gilts attract no capital gains tax. This should make up the bulk of the total return.
    • Below par (£100) gilts will guarantee you a gain at maturity. The price will fluctuate.
    • Coupon payments are taxed like bank account interest.
    • The Gilts Yield web site may be helpful.

• Tax efficiency:
  • Ideally hold bonds / gilts in a SIPP (tax deferred account).
  • Ideally hold only equity in the ISA. If bonds > than SIPP, then place in ISA.
  • Ideally hold only equity in a GIA as a distributing fund. The exception would be low coupon / tax efficient gilts.
  • Make use of the dividend allowance and capital gains tax allowance in a GIA every year.

• Portfolio:
  • Consolidating would make it simpler to manage and decrease the concentration in the USA.
    • Vanguard FTSE Global All Cap Index Fund - only if you want small cap.
    • Vanguard FTSE All-World UCITS ETF.
    • Vanguard FTSE Developed Europe UCITS ETF (90%) + Vanguard FTSE Emerging Markets UCITS ETF (10% - a little cheaper to hold) would be good options.
    • You don't need to use Vanguard. I would stick with a major well know firm like Vanguard.
  • Overall I would be considering a 60% equity / 40% bond portfolio. However you have a substantial sum in cash.
  • I would aim to treat all the cash & investments as a whole for working out the equity / bond split.
    • If your other sources of income are secure and indexed to inflation you can probably take more risk.
  • I manage my general investment account, ISA and SIPPs as a whole. I have a 60/40 split and that's what I intend to hold until early retirement.
  • There have been some very long drawdown periods. The Dot Com crash followed by GFC would have been a very hard period to hold 100% equity.
    • There have been some periods where recovery has taken a very long time +10 years. In that time inflation will have risen. When calculating / esitmating recovery periods take into account the impact of inflation.
  • My idea of a base portfolio for myself is:
    • 60% Global Equity - I own the Vanguard FTSE All World ETF.
    • 20% Global Aggregard Bond fund - I own the Vanguard one.
    • 20% Inflation linked gilts. I have a small percentage of short-term gilts too which will be converted into inflation linked gilts when they mature.

You could:

• Keep the SIPP 100% global equity & consolidate.
• Buy some gilts in a general investment account (40% of the total of the money).
• Pound cost average any remaining money into ISAs and / or general investment accounts and invest in equity.
• Consider taking more equity risk if you are sure you don't need the money for a long period and can handle a volatile market.

DottedEight

@FT8 Thanks for your detailed reply

And to everyone else kind enough to help.

As suggested, treat savings and sipp as one

List of assets

£114,000 SIPP ( Crystalised)

£200,00 total Savings

So that makes £314,000 grand total

We currently have £145,889.89 in Cash ISA's

We Currently have £54,333.67 in savings accounts

So I will invest the whole Sipp £114,000 into Vanguard FTSE All World UCITS ETF (VWRP)

And leave this alone

For security, I will treat my Cash ISA's as a Cash reserve ( I don't like bonds)

I will transfer £40,000 worth of Cash ISA's which will mature soon into Stocks and shares ISA, the same fund as my sipp but in a S&S ISA.

I have guaranteed income from state pensions and private pensions, my wife has private pension and state pension in 2029

aroominyork

Impressively fast decision making, as opposed to the (occasionally witnessed…) expectation of the skies opening and thy consensus to be delivered from on high.

DottedEight

https://forums.moneysavingexpert.com/discussion/comment/82075725#Comment_82075725

Thanks :-)

DottedEight

One thought

Rather than investing all £115,000 into Vanguard Ftse all world etf (vwrp) and having strong US bias

Is imvesting say

£74,750 in VWRP

£23000 in VEUA

£17,250 into VDEV

A better idea, it reduces us exposure by around 11%,

All on AJ Bell platform and all ETF funds so same hosting cost due to their cap

Worth pointing out I am 66 years old and don't need that money for at least 10 years but plan to derisk in 8 years time, I plan to use whats in the fund for the predicted final 10 years of life to age 86

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82084026#Comment_82084026

VWRP doesn't have a strong US bias, it has a neutral weighting, which results in a high proportion of US but this isn't a bias. If you want less US for whatever reason you are introducing a pro-rest-of-world-bias compared to what the rest of the market believes is a fair proportion.