Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

Interactive Investor SIPP & drawdown

Including Financial Independence and Retiring Early (FIRE)
NearlyThere
Lemon Pip
Posts: 85
Joined: September 4th, 2020, 11:44 am
Has thanked: 113 times
Been thanked: 37 times

Interactive Investor SIPP & drawdown

#427797

Postby NearlyThere » July 15th, 2021, 8:09 am

As part of my "de-accumulation plan" I'm consolodating a couple of pension funds into a new SIPP with ii.

Total pot will be £370k.

I'll be 55 at the end of this year, and plan to take 25% TFLS.

The remainder will go into drawdown, and I plan to take ~£11k / year as income as part of a bridge to state pension* at 67.

I'm trying to decide which fund(s) to buy in the SIPP when the transfer completes sometime next month.

Keep it simple with VLS60 or VLS80? or a mix of VWRP and VAGP? or something completely different? ii's investment pathways suggest Vanguard's target retirement 2020 fund.

Also not sure if I should leave 25% as cash in the SIPP ready for the TFLS element?

*I will also be taking a DB pension from 55 and have a 2 year cash buffer.

Cheers,
NT

Novision
Posts: 3
Joined: February 4th, 2020, 10:13 am
Has thanked: 7 times
Been thanked: 1 time

Re: Interactive Investor SIPP & drawdown

#428022

Postby Novision » July 16th, 2021, 10:23 am

Hi NT
I'm in a similar position and about to do the same. I'm thinking I'll go with a few global equity funds, like VWRL as I am sure I will get bored watching the stocks each day.

Interestingly I have just had a valuation from Utmost on an old Equitable plan which in Jan 20 got transferred from a with-profits basis to unit trust funds. The safe "lifestyle" portion has grown 5%, the risky equity portion is up 50%. During the crisis the fall in value for the risky bit was slightly higher than the safe portion (c5%), so I am not sure what the point is of these wind-down strategies. (Especially as I hope to live at least another 20 years and want capital appreciation!)

Personally, I wouldn't bother with holding cash in the SIPP - it will drag down your growth. Just sell when you need to draw cash. Depends on your attitude to risk and how much you need the specific amount of cash, I guess. Others will have more experience of this no doubt.

How have you found the process with ii? I have a SIPP with them and also with HL and have quite a bit to transfer in from various traditional pensions companies. Just wondering who is most efficient and has easy and inexpensive draw-down processes?

xxd09
Lemon Slice
Posts: 419
Joined: November 19th, 2016, 2:44 pm
Been thanked: 255 times

Re: Interactive Investor SIPP & drawdown

#428028

Postby xxd09 » July 16th, 2021, 10:37 am

Retired 18 years 75 years old
Some thoughts
£100000 of a 60/40 portfolio generates £3000 pa-have you got enough?
A global equities index tracker and a global bond index tracker hedged to the Pound is enough for most investors as investments
Cheap simple and easy to understand
You need to work out your Asset Allocation and ability to take risk ie how much equities and how much bonds
Your age minus 10 in bonds is a rough guide ie in your case 45% bonds
Personally I drew out the 25% tax free sum and lived on it for some years while the SIPP grew-it was back at its original level by the time I needed to drawdown again!
xxd09

NearlyThere
Lemon Pip
Posts: 85
Joined: September 4th, 2020, 11:44 am
Has thanked: 113 times
Been thanked: 37 times

Re: Interactive Investor SIPP & drawdown

#428261

Postby NearlyThere » July 17th, 2021, 10:35 am

Hi NT
I'm in a similar position and about to do the same. I'm thinking I'll go with a few global equity funds, like VWRL as I am sure I will get bored watching the stocks each day.

Interestingly I have just had a valuation from Utmost on an old Equitable plan which in Jan 20 got transferred from a with-profits basis to unit trust funds. The safe "lifestyle" portion has grown 5%, the risky equity portion is up 50%. During the crisis the fall in value for the risky bit was slightly higher than the safe portion (c5%), so I am not sure what the point is of these wind-down strategies. (Especially as I hope to live at least another 20 years and want capital appreciation!)

Personally, I wouldn't bother with holding cash in the SIPP - it will drag down your growth. Just sell when you need to draw cash. Depends on your attitude to risk and how much you need the specific amount of cash, I guess. Others will have more experience of this no doubt.

How have you found the process with ii? I have a SIPP with them and also with HL and have quite a bit to transfer in from various traditional pensions companies. Just wondering who is most efficient and has easy and inexpensive draw-down processes?


I must admit I'm tempted to go 100% VWRP. Having the guaranteed DB income covering essential expenses gives me some comfort.

I've only opened the ii account this week, I chose them based on flat fee and no extras when going into drawdown. Sent back the transfer requests, so I'll see how it goes and post an update.

AshleyW
Lemon Pip
Posts: 55
Joined: April 23rd, 2020, 5:43 pm
Been thanked: 32 times

Re: Interactive Investor SIPP & drawdown

#428306

Postby AshleyW » July 17th, 2021, 4:28 pm

There are various revies ofVanguard´s LifeStrategy and TargeDate funds on both RetirementAce.co.uk and Monevator. The advantage of going for individual funds say a FTSE World and Total Gilt is that in a market downturn you can sell off just the gilt portion whereas with a multi-asset fund you will be selling both stocks and bonds when the equities are at a low. If you are interested in using a Prime Harvesting unbalanced drawdown strategy you have no choice but to go with individual funds.

However, thinking 20 years or so into retirement when one´s mental capacity or motivation might not be that high there is great merit in going the LifeStrategy route using Vanguard as the platform - you just decide your monthly income and they do the rest. As far as target-date funds are concerned both Vanguard and Black Rock end up with only 30% or so in equities - this is probably Ok for US-based investors but the UK retiree needs 50%+, in fact, a recent article on RetirementAce on Variable Drawdown shows that the safe withdrawal rate improves with equity content right up to 100% for the UK when using a variable drawdown strategy.

Gilgongo
Lemon Slice
Posts: 415
Joined: November 5th, 2016, 6:51 pm
Has thanked: 154 times
Been thanked: 127 times

Re: Interactive Investor SIPP & drawdown

#428685

Postby Gilgongo » July 19th, 2021, 8:53 am

NearlyThere wrote:I must admit I'm tempted to go 100% VWRP. Having the guaranteed DB income covering essential expenses gives me some comfort.


Because sequence of returns risk is a... risk, I plan to have small but distinct set of asset holdings at first (a large cap, small cap, stocks, bonds and gold ETF and IT portfolio) so that I can selectively dip into those depending on market conditions. Selling the winners, basically. Then maybe about 10-15 years in when I'm getting less sharp and with luck SoR risk has passed, consolidate that into something like VWRP.

DrFfybes
Lemon Quarter
Posts: 3731
Joined: November 6th, 2016, 10:25 pm
Has thanked: 1171 times
Been thanked: 1964 times

Re: Interactive Investor SIPP & drawdown

#429516

Postby DrFfybes » July 22nd, 2021, 8:50 am

Novision wrote:Interestingly I have just had a valuation from Utmost on an old Equitable plan which in Jan 20 got transferred from a with-profits basis to unit trust funds. The safe "lifestyle" portion has grown 5%, the risky equity portion is up 50%. During the crisis the fall in value for the risky bit was slightly higher than the safe portion (c5%), so I am not sure what the point is of these wind-down strategies. (Especially as I hope to live at least another 20 years and want capital appreciation!)


AIUI the 'wind down' strategies were intended to reduce volatility in your pension value as you approached retirement. This was very important for planning, as most people were going to convert it into an annuity, and having a market crash a month before your 65th birthday could make quite a dent in your plans.

However with the new freedoms, SIPPs, Drawdown, etc then this sort of strategy is less relevant for anyone actively managing their retirement plans as you are unlikely to take an annuity, so short term fluctuations are of much lower importance than longer term performance.

Paul

Hariseldon58
Lemon Slice
Posts: 834
Joined: November 4th, 2016, 9:42 pm
Has thanked: 124 times
Been thanked: 513 times

Re: Interactive Investor SIPP & drawdown

#432914

Postby Hariseldon58 » August 6th, 2021, 2:21 pm

For the OAP I’d look at what I need in cash flow terms, ie to last to 67 from 55 , starting with 370k less 25% =£277k to last 12 years @11k per year ( 132k)

In the present markets its going to be equities, one approach could be Equity Income Investment Trusts, the usual suspects would provide the 4% necessary to generate £11k a year, not a bad idea. Income would probably rise and hopefully your capital increases over the 12 years.

Or you look at something like a Global Tracker, eg VWRL combined with some cash/bonds to cover say 5 years payments, that would give you a 80/20 portfolio, 5 years would cover most down periods. if the Equity portfolio is up after a year consider topping the cash back up to 5 years, after 7 years the cash portfolio of 5 years is hopefully intact and will cover you to state pension. If you NEED the 11k a year then you NEED a decent buffer, 2 years won’t be enough, you need to sleep well and the remaining portion in equities has to stay invested in bad times to give it time to recover and grow again.

Because we haven’t had any extended down markets for a while, a mistake to assume that they might not happen, a 5 year cash pot is going to last a while, the limited return is the price of insurance, however the 12 years may well give some decent growth for the invested portion.

Joe45
Lemon Pip
Posts: 72
Joined: October 22nd, 2019, 3:11 pm
Has thanked: 2 times
Been thanked: 24 times

Re: Interactive Investor SIPP & drawdown

#433749

Postby Joe45 » August 10th, 2021, 3:54 pm

Whenever I’m asked for advice on investing I always say:

1. Don’t try to beat the market.
2. Diversify as much as possible.
3. Bear down hard on costs.

Accordingly I suggest you consider creating your own LifeStrategy fund by combining an ultra low-cost global equity tracker with a low-cost bond tracker in the proportion that matches your risk appetite. This is what I (and xxd09) do.

Rebalance as you draw down and as part of your annual ‘bed & ISA’ exercise.

scrumpyjack
Lemon Quarter
Posts: 4811
Joined: November 4th, 2016, 10:15 am
Has thanked: 605 times
Been thanked: 2675 times

Re: Interactive Investor SIPP & drawdown

#433759

Postby scrumpyjack » August 10th, 2021, 4:25 pm

Personally I think Warren Buffet's advice is very sound (90% S&P500 tracker and 10% US short dated bonds), though I think I would prefer to go for an all world tracker. I would want my currency exposure NOT to be GBP as it has a long history of being a weak currency. Ideally Swiss Francs or perhaps USD if felt to be more practical.

Still WB has enough wealth at his age not to worry too much about risk!

https://www.investopedia.com/terms/1/90-10-strategy.asp

Personally, and given that many people live well into their 90s, I would not have any bonds in my pension assets.

TedSwippet
Lemon Slice
Posts: 577
Joined: November 4th, 2016, 12:57 pm
Has thanked: 134 times
Been thanked: 299 times

Re: Interactive Investor SIPP & drawdown

#433813

Postby TedSwippet » August 10th, 2021, 7:47 pm

scrumpyjack wrote:Personally I think Warren Buffet's advice is very sound (90% S&P500 tracker and 10% US short dated bonds), though I think I would prefer to go for an all world tracker.

The second of these. WB's advice is aimed squarely at US investors, and isn't really applicable to non-US ones.

scrumpyjack wrote:I would want my currency exposure NOT to be GBP as it has a long history of being a weak currency. Ideally Swiss Francs or perhaps USD if felt to be more practical.

This statement is inconsistent with holding an all-world equity tracker fund. By definition, an all-world stocks fund holds assets denominated in a whole range of currencies. And in particular, using a USD or CHF denominated fund or ETF doesn't alter this. A fund's or ETF's denomination currency is a performance yardstick, but not a currency hedge.

scrumpyjack
Lemon Quarter
Posts: 4811
Joined: November 4th, 2016, 10:15 am
Has thanked: 605 times
Been thanked: 2675 times

Re: Interactive Investor SIPP & drawdown

#433814

Postby scrumpyjack » August 10th, 2021, 7:49 pm

TedSwippet wrote:
scrumpyjack wrote:Personally I think Warren Buffet's advice is very sound (90% S&P500 tracker and 10% US short dated bonds), though I think I would prefer to go for an all world tracker.

The second of these. WB's advice is aimed squarely at US investors, and isn't really applicable to non-US ones.

scrumpyjack wrote:I would want my currency exposure NOT to be GBP as it has a long history of being a weak currency. Ideally Swiss Francs or perhaps USD if felt to be more practical.

This statement is inconsistent with holding an all-world equity tracker fund. By definition, an all-world stocks fund holds assets denominated in a whole range of currencies. And in particular, using a USD or CHF denominated fund or ETF doesn't alter this. A fund's or ETF's denomination currency is a performance yardstick, but not a currency hedge.


Quite but a previous poster on this discussion referred to having his investments hedged to sterling, presumably external to the ETF or whatever the investment was. The last thing I would want to do!

NearlyThere
Lemon Pip
Posts: 85
Joined: September 4th, 2020, 11:44 am
Has thanked: 113 times
Been thanked: 37 times

Re: Interactive Investor SIPP & drawdown

#435931

Postby NearlyThere » August 19th, 2021, 12:52 pm

scrumpyjack wrote:Quite but a previous poster on this discussion referred to having his investments hedged to sterling, presumably external to the ETF or whatever the investment was. The last thing I would want to do!


So, is VWRP / VAGP not a good plan then?

scrumpyjack
Lemon Quarter
Posts: 4811
Joined: November 4th, 2016, 10:15 am
Has thanked: 605 times
Been thanked: 2675 times

Re: Interactive Investor SIPP & drawdown

#435942

Postby scrumpyjack » August 19th, 2021, 1:36 pm

NearlyThere wrote:
scrumpyjack wrote:Quite but a previous poster on this discussion referred to having his investments hedged to sterling, presumably external to the ETF or whatever the investment was. The last thing I would want to do!


So, is VWRP / VAGP not a good plan then?


VWRP is not hedged as far as I am aware. It is simply quoted in GBP. That is fine and probably saves a little otherwise the broker will take a cut of every transaction for currency conversion fees.

puffster
2 Lemon pips
Posts: 119
Joined: November 16th, 2016, 9:25 pm
Has thanked: 99 times
Been thanked: 39 times

Re: Interactive Investor SIPP & drawdown

#435967

Postby puffster » August 19th, 2021, 2:56 pm

scrumpyjack wrote:VWRP is not hedged as far as I am aware. It is simply quoted in GBP. That is fine and probably saves a little otherwise the broker will take a cut of every transaction for currency conversion fees.

VWRL pays dividends in USD so is subject to currency conversion fees.

Regards, Puffster

scrumpyjack
Lemon Quarter
Posts: 4811
Joined: November 4th, 2016, 10:15 am
Has thanked: 605 times
Been thanked: 2675 times

Re: Interactive Investor SIPP & drawdown

#435973

Postby scrumpyjack » August 19th, 2021, 3:16 pm

puffster wrote:
scrumpyjack wrote:VWRP is not hedged as far as I am aware. It is simply quoted in GBP. That is fine and probably saves a little otherwise the broker will take a cut of every transaction for currency conversion fees.

VWRL pays dividends in USD so is subject to currency conversion fees.

Regards, Puffster


We were talking about VWRP, not VWRL. VWRP is an accumulating ETF so does not pay dividends

NearlyThere
Lemon Pip
Posts: 85
Joined: September 4th, 2020, 11:44 am
Has thanked: 113 times
Been thanked: 37 times

Re: Interactive Investor SIPP & drawdown

#436130

Postby NearlyThere » August 20th, 2021, 6:36 am

Thanks for all the replies

An update on the transfer process - The smaller (£65k) pot from Legal & General has arrived in my ii SIPP yesterday, 36 days after initiating the transfer request. Both ii and L&G appear to have dealt with it efficiently.

I have not yet received my transfer pack from Willis Towers Watson for the larger pot, despite making the request at the same time as with L&G.

Chasing this by phone, I'm told by WTW that the transfer pack is having a 'final review' before being sent to me. It looks like they may be dragging their heels.

On a different note... when the funds arrive, should I be concerned about making a single largeish (for me!) trade in VWRP in one go?

Hariseldon58
Lemon Slice
Posts: 834
Joined: November 4th, 2016, 9:42 pm
Has thanked: 124 times
Been thanked: 513 times

Re: Interactive Investor SIPP & drawdown

#436148

Postby Hariseldon58 » August 20th, 2021, 8:42 am

NearlyThere wrote:

On a different note... when the funds arrive, should I be concerned about making a single largeish (for me!) trade in VWRP in one go?


In one lump sum or spread over a period ? No one knows the answer.

There ia academic evidence that on ‘average’ you are better doing one lump sum but your case is not ‘average’. It’s more a question of minimising regret, you could do three transactions over three months, three weeks, three days… if you think your going to be troubled then do so, but given you are already out of the market I’d personally get on with it, you will be receiving a second pension lump sum from the other provider and that gives an element of two Re investments in any case.

Itsallaguess
Lemon Half
Posts: 9129
Joined: November 4th, 2016, 1:16 pm
Has thanked: 4140 times
Been thanked: 10023 times

Re: Interactive Investor SIPP & drawdown

#436155

Postby Itsallaguess » August 20th, 2021, 9:05 am

NearlyThere wrote:
On a different note... when the funds arrive, should I be concerned about making a single largeish (for me!) trade in VWRP in one go?


If you're likely to be fretting over the short-term valuation once you've started moving this sum into the market, then there may be some personal benefits to at least splitting the sum into two separately-spaced trades, and possibly even more.

Personally, I know myself well enough to know that I'd get some personal benefit from doing that if I were in your position, as we're in a fairly bumpy market and I know I'd prefer to drip large sums in, rather than commit in one lump and then be concerned if I'd 'got the timing right', and dripping in (or at least splitting it into more that one trade..) works well for me in removing much of that concern where it might involve large sums.

I take the view that over the long-term, it's highly likely that any initial approach you take with these types of questions, whether that be single-trade or multiple-trades over a period of time, is likely to result in a 'long-term performance difference' that will be seen as nothing but noise after many years of being invested, so if that's the case, then for me it's really all about finding the most 'mentally comfortable' process that suits you as an individual...

Cheers,

Itsallaguess

TedSwippet
Lemon Slice
Posts: 577
Joined: November 4th, 2016, 12:57 pm
Has thanked: 134 times
Been thanked: 299 times

Re: Interactive Investor SIPP & drawdown

#436233

Postby TedSwippet » August 20th, 2021, 1:29 pm

NearlyThere wrote:On a different note... when the funds arrive, should I be concerned about making a single largeish (for me!) trade in VWRP in one go?

On the assumption that these funds are (from cashing in?) money that was invested in more-or-less the same assets, or at least in equities, before the pension transfer, all at once seems the most sensible. The logic being that you were happy with its risk profile before the move, so this is more a translation than it is a reorganisation.

As for the trade itself, for larger trades it can sometimes be a good idea to use limit orders rather than at-market, to ensure that you don't get an off-trend price on the ETF. Setting the limit between bid and offer usually works, or you can make it instantly 'marketable' by setting your limit at a tiny smidgen above the current offer.

It seems though that II offers a 15 second take-it-or-leave-it price on market orders when markets are open. Also fine. All you need do in that 15 seconds is ensure that the price offered is a fair one; typically, very close indeed to the most recent trade price. Avoid placing a market order when the market is closed. Start and end of day is when most off-trend prices occur. Maybe avoid the first hour and the last hour of a market's trading period.

Personally, I prefer the second of these methods. Less messing about. I've used the first only where the second isn't an option.


Return to “Retirement Investing (inc FIRE)”

Who is online

Users browsing this forum: chris and 13 guests