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  • FIRST POST
    • johnD17
    • By johnD17 16th Jan 18, 1:37 PM
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    johnD17
    Intro Pension/SIPP Fund Advice
    • #1
    • 16th Jan 18, 1:37 PM
    Intro Pension/SIPP Fund Advice 16th Jan 18 at 1:37 PM
    Hi All -


    I'm 29, newly (12 months) working as a contractor within IT, have a small pension pot (2k) from previous employer that I have deposited into a SIPP on Hargreaves Lansdown, under their BALANCED fund. Wish to put another c. 5k in before the end of my tax year.


    Just wondering whether this is the best risk fund for my age (i.e. is it TOO conservative).


    For those not familiar with HL, they only have a small number of 'ready made' funds (emerging markets - is this too risky?, equity/bonds - which I am looking to use on an ISA basis to invest my dads inheritance for my mum).


    thanks!
Page 1
    • Drp8713
    • By Drp8713 16th Jan 18, 2:12 PM
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    Drp8713
    • #2
    • 16th Jan 18, 2:12 PM
    • #2
    • 16th Jan 18, 2:12 PM
    Given your age, and assuming you understand the risk of volatility (that it will crash 3 or 4 times by 50%+ between now and the time you retire, before recovering and averaging circa 5% over inflation long term).

    Then I would recommend Blackrock Consensus 100 for your 7k. Only charges 0.1% per annum, and gets you globally diversified. Perfect for small amounts.

    My wife is a simliar age to you and also has a small SIPP with HL to supplement a DB pension and thats the fund we use for her to drip into each month.
    • dunstonh
    • By dunstonh 16th Jan 18, 2:14 PM
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    dunstonh
    • #3
    • 16th Jan 18, 2:14 PM
    • #3
    • 16th Jan 18, 2:14 PM
    I'm 29, newly (12 months) working as a contractor within IT, have a small pension pot (2k) from previous employer that I have deposited into a SIPP on Hargreaves Lansdown, under their BALANCED fund. Wish to put another c. 5k in before the end of my tax year.
    Normally, the point of going DIY is to save money compared to the cost of advice. You have chosen a cash cow investment fund that is far more expensive than advised options as well as other DIY options.
    For those not familiar with HL, they only have a small number of 'ready made' funds (emerging markets - is this too risky?, equity/bonds - which I am looking to use on an ISA basis to invest my dads inheritance for my mum).
    All the regulars here are aware of their expensive cash cow funds.

    It is probably more a case of whether you are aware of them beyond how you have understood their marketing. its great you are finally starting to take your pension seriously but perhaps a tad more research is in order?

    Just wondering whether this is the best risk fund for my age (i.e. is it TOO conservative).
    Risk is not just about timescale. It is about capacity for loss and behaviour. Time, when viewed in isolation of other issues, would suggest you take more risk. However, your knowledge, understanding and behaviour will impact on that. Along with capacity for loss (less of an issue in the early years but behaviour leading to bad decisions or you forgetting to adjust risk later could cause issues).
    Last edited by dunstonh; 16-01-2018 at 4:15 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • johnD17
    • By johnD17 16th Jan 18, 3:56 PM
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    johnD17
    • #4
    • 16th Jan 18, 3:56 PM
    • #4
    • 16th Jan 18, 3:56 PM
    Thanks for the above, would like to know more especially around the above post, I will give some context as to why I arrived at HL.


    I actually sat down with a financial advisor, largely to discuss options to invest my late fathers inheritance for my mum - and he added a pension option in for me, however they were charging large initial fees and larger ongoing fees than HL, so I am surprised at the view that HL are expensive? They also weren't truly independent (ties to St james place and advised a St james place fund).


    I was also aware via an ex IFA that some IFAs charges and simply use HL.


    When I first looked at HL I was swamped at the options (my aim was to simply pick a similar fund to the one the IFA recommended, with lower fees and saving the advice fee) - but my father in law (Ex ifa) showed me his investments, and they were all in these 'ready made' funds which I didn't initially see.


    Will take a look at the Blackrock one above - I'm taking from the above that HL aren't as good as they first seem, but perhaps this is because they are 'ready made'? I don't have the knowledge or inclination to actively a manage a portfolio.
    • johnD17
    • By johnD17 16th Jan 18, 4:19 PM
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    johnD17
    • #5
    • 16th Jan 18, 4:19 PM
    • #5
    • 16th Jan 18, 4:19 PM
    @DRP - Do you mean using the blackrock fund via HL or directly?
    • dunstonh
    • By dunstonh 16th Jan 18, 4:19 PM
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    dunstonh
    • #6
    • 16th Jan 18, 4:19 PM
    • #6
    • 16th Jan 18, 4:19 PM
    They also weren't truly independent (ties to St james place and advised a St james place fund).
    It isnt a case of not being truly independent. They are not independent at all. No shades of grey. They are a single provider tied sales rep.

    I was also aware via an ex IFA that some IFAs charges and simply use HL.
    Depends on the IFA as to how they set their charges. However, for you, starting out with a small value, its likely a simple multi-asset solution at low cost is best. Looking at around 0.4% p.a. Compare that to what you are paying at HL. However, many IFAs would not be interested in low value cases. So, unless there is a family IFA or an existing relationship, it may be hard to find an IFA. HL offer a lot of better value funds.

    'm taking from the above that HL aren't as good as they first seem, but perhaps this is because they are 'ready made'? I don't have the knowledge or inclination to actively a manage a portfolio.
    Multi-asset funds are ready made too. They are available from 0.05% upwards.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • TcpnT
    • By TcpnT 16th Jan 18, 4:28 PM
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    TcpnT
    • #7
    • 16th Jan 18, 4:28 PM
    • #7
    • 16th Jan 18, 4:28 PM
    The point being made is not that HL are a poor choice or excessively expensive, but that the ready made packaged portfolios that you have chosen are a very expensive option compared compared to choosing individual active or passive funds from their range yourself. If you look at the annual fund charge (not HL platform charge) for what you have you will see that it is high. ie they are charging extra to package these up for you and periodically rebalance etc. They also offer something called "master portfolios" which suggest a particular mix of funds suited to your objectives. There is no extra charge for this service above the cost of the individual funds chosen. It's a mid cost option if you don't feel confident in making your own choices.
    • greenglide
    • By greenglide 16th Jan 18, 4:30 PM
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    greenglide
    • #8
    • 16th Jan 18, 4:30 PM
    • #8
    • 16th Jan 18, 4:30 PM
    As an IT contractor you will almost certainly trade your own limited company unless you are contractin through an umbrella company.

    If you do have your own company then employer contributions through the company is generally the best deal.

    If using an umbrella company why? A limited company tends to be much better unless the agency doesn't want to?
    • Audaxer
    • By Audaxer 16th Jan 18, 4:31 PM
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    Audaxer
    • #9
    • 16th Jan 18, 4:31 PM
    • #9
    • 16th Jan 18, 4:31 PM
    As an alternative to the costly HL Ready Made funds, the OP should consider Vanguard LifeStrategy funds, L&G Multi Index funds and HSBC Global Strategy funds. These are all low cost globally diversified multi asset funds with different versions to suit your preferred risk/volatility level.
    • Drp8713
    • By Drp8713 16th Jan 18, 6:07 PM
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    Drp8713
    @DRP - Do you mean using the blackrock fund via HL or directly?
    Originally posted by johnD17
    Via HL.

    HL is not the cheapest but with 7k invested, you can have the platform fee and Blackrock fund with charges of less than 40 a year.
    • johnD17
    • By johnD17 17th Jan 18, 3:46 PM
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    johnD17
    Thanks for the above - will read, digest and research.


    Re this particular point - yes I have my own LTD company (no umbrella) and am wishing to contribute via the company - but this is exactly where my post originates, I want to contribute via the company for tax relief, but I have done this by creating a SIPP via HL, and using a ready made balanced managed fund - which sounds like I can do better with.


    Fund will be c. 7k but I will be aiming to contribute at least a few thousand a year.
    • johnD17
    • By johnD17 17th Jan 18, 3:58 PM
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    johnD17
    Ah so my fund charges 1.46% annually.


    One question I have is how can/can you change the funds through the life of investment i.e. start riskier and go low risk towards retirement.


    AMENDED: second question. How do charges work for transferring funds on HL. i.e. will I still be required to pay the annual HL fund fee if my money has been there for a few weeks and I transfer to another fund?
    Last edited by johnD17; 17-01-2018 at 4:34 PM.
    • johnD17
    • By johnD17 17th Jan 18, 5:35 PM
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    johnD17
    thanks for the above listed funds, have dumped charges and past performance in excel to compare.


    further questions (sorry)


    1) would fund choice would differ if amounts were much larger?
    2) surely assumption of 5% per annum interest on a relatively low contributions, over c. 20 years wouldn't be 'enough' for a pension? When looking at projections from company pensions (i.e. Co-op, Aviva) I've had in the past and transferred out, there projections would provide a pension 'salary' from only small contributions (I take the point that the company often matches the contributions).
    Last edited by johnD17; 18-01-2018 at 9:11 AM.
    • johnD17
    • By johnD17 22nd Jan 18, 8:42 PM
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    johnD17
    another newbie question, specifically looking at funds like Vanguard life strategy, they have different % in equity, what is the remainder made up of? and what is the typical split for a pension?

    Further, when I've done more reading I am likely to post about a fund for a shares ISA for my dads inheritance to invest on behalf of my mum, would a similar fund be used, or should the make up of the fund and risk be different, as this would be 'less' long term, low risk and c. 5+ years.
    • Alexland
    • By Alexland 22nd Jan 18, 9:41 PM
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    Alexland
    With Vanguard the rest is made up of bonds - long term loans to governments and companies that pay interest.

    These are more risky than a bond you might get from a bank as the bonds are valued at their second hand rate depending on the attractiveness of their interest payments. At the moment interest rates are low so people have been paying a premium for bonds with higher rates. The concern is this might unwind if rates start rising.

    https://www.vanguardinvestor.co.uk/what-we-offer/life-strategy-products

    Multi asset funds are suitable for many situations but each person will have their own investment timespan and volatility tollerence. If investing for only 5 years it's tricky as there is a material possibility of a loss at the end.

    Alex
    Last edited by Alexland; 22-01-2018 at 9:46 PM.
    • johnD17
    • By johnD17 25th Jan 18, 6:18 PM
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    johnD17
    thanks Alex (used up my post thanks!)

    reading another thread on here, naively, I was unaware of the platform charge from HL for the SIPP 0.45%. This is on top of the fund fees.

    I rang up HL to ask for the best method for my scenario -

    Current SIPP with c. 2k in HL balanced fund.

    Desire to move out into one of the above funds and add extra circa 5k.

    The guy advised me to trade and then buy again online, but also advised of the dealing fees (Which I have now seen).

    The main piece that needs clearing up is the definition of a FUND.

    So - i currently have a FUND, but have a desire to sell this, and invest in a MULTI ASSET fund(>???). Fund dealing is free, but share dealing has charges. Is this correct? Taking Vanguard as an example, this is a colletion of shares and bonds, so is this a fund? therefore no dealing charge?

    Current fund just dropped by a tenner today so might wait on trading (yes i know it will all ebb and flow)

    http://www.hl.co.uk/pensions/sipp/charges-and-interest-rates
    • johnD17
    • By johnD17 12th Mar 18, 7:04 PM
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    johnD17
    so guys, looks like the market has 'taken a hit' since posting - as my pension fund (in both vanguard & HL Multi manager) - my play with 100 in asia is the only thing in the black.

    I have a considering sum of dads inheritance that I was 'waiting' until March to 1)understand the options and 2) see market health with the political landscape, to invest to get the most of tax year allocations.

    thoughts/advice?

    thanks
    • dunstonh
    • By dunstonh 12th Mar 18, 7:46 PM
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    dunstonh
    Markets are down a minor blip. If you see this as anything other than that then you are probably looking at investing above your risk profile.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • BLB53
    • By BLB53 12th Mar 18, 7:54 PM
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    BLB53
    One question I have is how can/can you change the funds through the life of investment i.e. start riskier and go low risk towards retirement.
    Use Vanguard Target Retirement fund where the level of equities reduces automatically as you get closer to your selected retirement date.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • AnotherJoe
    • By AnotherJoe 13th Mar 18, 6:38 AM
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    AnotherJoe
    so guys, looks like the market has 'taken a hit' since posting - as my pension fund (in both vanguard & HL Multi manager) - my play with 100 in asia is the only thing in the black.

    I have a considering sum of dads inheritance that I was 'waiting' until March to 1)understand the options and 2) see market health with the political landscape, to invest to get the most of tax year allocations.

    thoughts/advice?

    thanks
    Originally posted by johnD17
    Over the timescale you are looking at investing these drops hardly even count as blips.
    At some point you will see 30 & 40% losses. If you are worried about what is pretty much noise in terms of fluctuations you need to dial the risk down to much more conservative funds bearing in mind over 30 years of your investing before retirement you will also see many more 10 & 20% gain years which will overall gain you much more. Its hard to take on board but drops at the moment are your friends, you want the market to be down because every time you buy you want to buy cheap units. There's thirty years for them to grow.

    Dont think its just you, immediately after Brexit there were some huge drops and some fund managers panicked and sold up big time, despite the fact they should have known better. Since then those drops have been far more than compensated for. If you bought just after the drops you'd be much better off than waiting for say a year, thinking "its all on the up now so I"ll buy now".

    So, either learn to hold your nerve, or buy more conservative funds which over the time you have will give you much lower gains but perhaps fewer sleepless nights as well.
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