Intro Pension/SIPP Fund Advice

johnD17 · 16 January 2018 at 2:37PM

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!

Drp8713 · 16 January 2018 at 3:12PM

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 · 16 January 2018 at 3:14PM

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).

johnD17 · 16 January 2018 at 4:56PM

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 · 16 January 2018 at 5:19PM

@DRP - Do you mean using the blackrock fund via HL or directly?

dunstonh · 16 January 2018 at 5:19PM

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.

TcpnT · 16 January 2018 at 5:28PM

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 · 16 January 2018 at 5:30PM

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 · 16 January 2018 at 5:31PM

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 · 16 January 2018 at 7:07PM

johnD17 wrote: »

@DRP - Do you mean using the blackrock fund via HL or directly?

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 · 17 January 2018 at 4:46PM

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.

Intro Pension/SIPP Fund Advice

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