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    • HRT dependant
    • By HRT dependant 11th Mar 18, 12:35 PM
    • 172Posts
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    HRT dependant
    sipp advise please
    • #1
    • 11th Mar 18, 12:35 PM
    sipp advise please 11th Mar 18 at 12:35 PM
    good afternoon all

    my partner is 57 and has put 15,000 in a HL sipp in cash for this year,this is his max amount,he will also be paying in aprox 15,000 per year for the next five years then stopping work and drawing the max per year out without paying tax.
    it it best for him to leave it in cash and put a lump sum in at the end of each year or pay in monthly and put the cash into a fund to grow.
    we are not savvy on investments and do not want to risk loosing money as it will only be in for five years
    any advise would be much appreciated
Page 1
    • Dazed and confused
    • By Dazed and confused 11th Mar 18, 12:45 PM
    • 2,559 Posts
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    Dazed and confused
    • #2
    • 11th Mar 18, 12:45 PM
    • #2
    • 11th Mar 18, 12:45 PM
    You are probably between a rock and a hard place!

    If you don't want to risk losing money then it's probably a choice between cash or possibly there may be a bond fund but the issue with cash is that you will be losing purchase power due to inflation.

    One thing which will counteract this of course is the tax relief but you would be getting that irrespective of investment choices.
    • dunstonh
    • By dunstonh 11th Mar 18, 2:25 PM
    • 92,634 Posts
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    dunstonh
    • #3
    • 11th Mar 18, 2:25 PM
    • #3
    • 11th Mar 18, 2:25 PM
    it it best for him to leave it in cash and put a lump sum in at the end of each year or pay in monthly and put the cash into a fund to grow.
    Most people invest it at the point of contribution.

    we are not savvy on investments and do not want to risk loosing money as it will only be in for five years
    Leaving it in cash is guaranteed to lose you money in real terms as well as placing it at shortfall risk. Remember that investment risk is just one of the risks and not the only risk.

    Where does this 5 years come from? Even if your partner is only paying in for 5 years, does not mean that the money is only going to be invested for 5 years. The rate of draw is going to take a number of years. So, a good chunk of the money is going to be beyond 5 years.
    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.
    • HRT dependant
    • By HRT dependant 11th Mar 18, 2:33 PM
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    HRT dependant
    • #4
    • 11th Mar 18, 2:33 PM
    • #4
    • 11th Mar 18, 2:33 PM
    Most people invest it at the point of contribution.



    Leaving it in cash is guaranteed to lose you money in real terms as well as placing it at shortfall risk. Remember that investment risk is just one of the risks and not the only risk.

    Where does this 5 years come from? Even if your partner is only paying in for 5 years, does not mean that the money is only going to be invested for 5 years. The rate of draw is going to take a number of years. So, a good chunk of the money is going to be beyond 5 years.
    Originally posted by dunstonh
    thank you for your reply I see what you are saying would vanguard target retirement or vanguard life strat be a good idea
    • Bravepants
    • By Bravepants 11th Mar 18, 2:45 PM
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    Bravepants
    • #5
    • 11th Mar 18, 2:45 PM
    • #5
    • 11th Mar 18, 2:45 PM
    Your husband is doing something similar to what I'm planning to do.

    I am in the process of transferring an AVC to SIPP. It will go in as cash, and the maximum I want in there is about 80k, equivalant to approx. 5 chunks of 15,800 (11,800 plus 25% tax free). I wish to draw this down from retirement at 55, for 5 years, as a FS pension kicks in at 60.

    I am in two minds whether to just to keep it all as cash. I'm a higher rate tax payer, and as far as I'm concerned i've made 40% on the AVC pot simply by paying in.

    The other option is based on the fact that "They" say not to invest money you need to use within 5 years. In 5 years time I hit 55. So I would want 15,800 in the SIPP as cash NOW, NOT in an investment fund. SO I could keep 15,800 as cash and invest the rest in a conservative fund. Next year, I will then sell an additional 15,800 from the fund and add that to the cash portion, and so on every year for the next few years, until when I hit 54 I sell the final chunk of funds to preserve 15,800. I will need ALL of the pot within the five years from 55. If the invested portion of the fund has grown during that time, then fair enough, I'll just take a tax hit on that. If the funds have fallen in value then OK, I could top-up!

    If the fund portion has crashed to 40% of its value, then tough! I won't be able to retire early! Unless I draw more from my S&S ISA. You do have an S&S ISA don't you to supplement your SIPP drawdown? If not then you might be better keeping it all as cash from now on especially if you are relying on it!
    Last edited by Bravepants; 11-03-2018 at 3:09 PM.
    • dunstonh
    • By dunstonh 11th Mar 18, 2:54 PM
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    dunstonh
    • #6
    • 11th Mar 18, 2:54 PM
    • #6
    • 11th Mar 18, 2:54 PM
    thank you for your reply I see what you are saying would vanguard target retirement or vanguard life strat be a good idea
    The Vanguard target return fund is a niche fund that suits a very small number of people and doesnt seem to fit the objectives here at all. VLS may be an option but not enough to go on.

    Its likely that a self mananged risk reduction will be necessary given the way the withdrawals are planned. It is also worth noting that in the majority of cases, risk reduction results in a lower outcome. Risk reduction is about the capacity for loss. i.e. not being able to afford the loss. It's not about giving the best return. I cant remember the figures as it was a long time back but it was researched and backtested over something like 25 years and lifestyle risk reduction only gave the better return in something like 20% of the periods.
    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.
    • Nick Millward
    • By Nick Millward 15th Mar 18, 10:26 AM
    • 1 Posts
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    Nick Millward
    • #7
    • 15th Mar 18, 10:26 AM
    • #7
    • 15th Mar 18, 10:26 AM
    I would suggest the lump sum option. that, plus the tax relief invests more into the market earlier.
    Statistically the gains over (almost) a year will be advantageous.
    • ProDave
    • By ProDave 15th Mar 18, 11:39 AM
    • 845 Posts
    • 961 Thanks
    ProDave
    • #8
    • 15th Mar 18, 11:39 AM
    • #8
    • 15th Mar 18, 11:39 AM
    I too am in a similar position.

    In my case it is now in a HL drawdown SIPP I don't intend to add or withdraw anything for 5 years.

    I too am looking for a safe fund to park it in for those 5 years. I want to be certain it's value does not drop, but would like it to increase. I am too nervous of a stock market crash and not enough time in 5 years for it to recover. The markets have had a good run, and I fear with Brexit and all that there is more downward scope than upward in the short term.
    • Audaxer
    • By Audaxer 15th Mar 18, 1:47 PM
    • 1,043 Posts
    • 603 Thanks
    Audaxer
    • #9
    • 15th Mar 18, 1:47 PM
    • #9
    • 15th Mar 18, 1:47 PM
    thank you for your reply I see what you are saying would vanguard target retirement or vanguard life strat be a good idea
    Originally posted by HRT dependant
    Vanguard LifeStrategy funds seem to be a better option for most that the Vanguard Target Retirement funds, but he will need to leave it invested for over 5 years. If he pays in 15k this year and then 15k for the next 5 years he will have invested 90k assuming the 15k per year is gross, i.e. including the 25% tax relief.

    When he starts drawing it out after 5 years, if he wants the fund to last he should consider only drawing out up to 4% per year, with preferably a cash buffer so that he doesn't need to draw out anything if/when there are equity crashes as there will be over the long term.
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