Opening a SIPP and investing in Vanguard LifeStrategy 80

swindiff · 18 July 2018 at 3:02PM

Hi
Want to open a SIPP for the wife, know very little about investing but from what I have read on here Vanguard LifeStrategy 80 might be what we are after. Want something that we can invest in and forget about and hopefully see growth that will beat inflation. Looking for a pension to plug the gap between our planned retirement age of 60 and state retirement age, and to use up her tax free allowance between those years.

So the questions are, does it matter who the provider is. Have looked at Hargreaves Lansdown and AJ Bell and the charges seem to be the same unless I am missing something.

Would want to pay in each month by direct debit. Initially £160/month so £200 with tax relief added. Does that go in and sit as cash until we manually buy funds with it, or is that done automatically?

Many thanks

dunstonh · 18 July 2018 at 3:44PM

So the questions are, does it matter who the provider is. Have looked at Hargreaves Lansdown and AJ Bell and the charges seem to be the same unless I am missing something.

Yes it does matter as platform services are an added service you are paying for. So, paying more for something you wont be using would be a waste of money.

Have you considered a stakeholder pension or personal pension as they have similar funds and may well be cheaper for you than HL.

Initially £160/month so £200 with tax relief added. Does that go in and sit as cash until we manually buy funds with it, or is that done automatically?

Some SIPPs will see the tax relief go into the cash account and require you to manually purchase the funds. Some will invest it. Personal pensions and stakeholder funds will usually pre-fund it and automatically add it the funds.

swindiff · 18 July 2018 at 3:57PM

Thanks. Any recommendations for pension providers? I like the idea of being able to log onto the account online and see how it's doing.

BLB53 · 18 July 2018 at 4:01PM

VLS 80 would be a good choice

So the questions are, does it matter who the provider is. Have looked at Hargreaves Lansdown and AJ Bell and the charges seem to be the same unless I am missing something.

HL charge 0.45% platform but no charges for the monthly purchase of the fund.

AJB charge 0.25% platform fee and £1.50 for each monthly purchase which would add an extra 1% so in the early days HL would work out cheaper.

NB Vanguard Investor are due to launch their own sipp later this year which would be less expensive than both above options.

zagfles · 18 July 2018 at 5:25PM

The problem with personal pensions/stakeholders is that most providers seem to insist you use an intermediary (financial adviser/broker) which would add to the cost, and those that don't usually have higher fees, maybe close to 1% or so, which could make a SIPP a cheaper option.

Cavendish do a few personal pensions/stakeholders for a reasonable fee: https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/

squirrelpie · 19 July 2018 at 2:28AM

As another thought, it might work out easier to use an ISA instead of a SIPP. There are easier rules and Vanguard already run their own ISA, and if you're a basic rate tax payer the tax treatment is not too different.

swindiff · 19 July 2018 at 6:43AM

Won't get the 20% tax relief on an ISA though

Spreadsheetman · 19 July 2018 at 7:08AM

swindiff wrote: »

Won't get the 20% tax relief on an ISA though

...and also:

SIPPs are protected from bankruptcy
and also outside the estate value calculation on death so can be passed on with no inheritance tax.

NoMore · 19 July 2018 at 9:17AM

squirrelpie wrote: »

As another thought, it might work out easier to use an ISA instead of a SIPP. There are easier rules and Vanguard already run their own ISA, and if you're a basic rate tax payer the tax treatment is not too different.

The choice of either ISA or SIPP or even both should be made according to your objectives, not because one is 'easier'.

swindiff · 20 July 2018 at 10:42AM

BLB53 wrote: »

VLS 80 would be a good choice

NB Vanguard Investor are due to launch their own sipp later this year which would be less expensive than both above options.

Thanks for the heads up on that, signed up to be notified when they launch their SIPP later this year.

Alexland · 21 July 2018 at 7:49AM

Without knowing your wife's current age (relative to withdrawal from age 60) or volatility tolerance it's hard to comment on the appropriateness of the fund choice but I will say VLS80 is a good fund but intended for people who have a long term investment horizon - ideally 10 years+ to ride the ups and down. As she gets closer to withdrawal then she should be looking to gradually reduce risk.

In terms of platforms HL at 0.45% is expensive and AJ Bell is more reasonable at 0.25% but the £1.50 fund trade costs are unnecessary when you could go with Cavendish or Charles Stanley Direct and pay 0.25% with no trade costs. Or just wait a few more months and see how Vanguard price their SIPP as people are hoping it will match their 0.15% fee on their ISA/JISA/GIAs. If so this will be good for small investors.

Also worth checking that a SIPP is the most efficient option for your wife's situation. If she is employed it may be better to make a contribution into a workplace pension (for employer matched contributions and possible national insurance savings) and if under 40 and basic rate may be better with a S&S LISA as it is the same 25% government contribution but no tax on withdrawal. Still if she is drawing this between 60 and SP age then she may not have a high enough income in those years to pay tax anyway. Depends what other pension(s) she may have.

Alex

Opening a SIPP and investing in Vanguard LifeStrategy 80

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