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sipp investments
john brace
Posted: 23 August 2017 14:33:32(UTC)
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I have been following the forums for a long time and would be grateful if I could have comments on my son's SIPP which I look after.
Built up from £12000 in the 90's and now worth 164000. I'm getting near 80 and am getting nervous as he has no investment knowledge
3in 4.5%
BG emerging markets growth 3.6%
FCSS 3.2%
FGT 3%
HPVE 3%
Lendinvest secured income 3.2%
ishares minimum volatility MINV 3.9%
MNKS 9%
PCT 3.8%
RIT 7.6%
Ruffer RICA 7.6%
SMT 13.7%
Seneca global growth and income trust 3.9%
TRG 3.2%
WTAN 9.6%
WWH 9%

The remaining PNL just sold with thoughts of reinvesting in CGT as PNL didn't do well in the 2008 crash.

son is aged 53

I know there should be more safer bond-like holdings.
not keen on Vanguard as they seem to be all tracker funds, so presumably will
also track downwards.
Any thoughts will be welcome
Law Man
Posted: 28 August 2017 11:07:12(UTC)
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John: I interpret that you manage your son's SIPP; perhaps with a view to son drawing an income from his age 65 - in 12 years from now.

I suggest you consider who will manage it after you. Can you teach your son? If not, consider leaving simple suggestions - most important asset allocation & diversification.

On your current holdings - they are higher risk, apart from RICA. Stand back with a clean sheet and map your ideal allocation e.g. X% in UK large cap, Y% in UK small cap, Z% in corporate bonds, etc.
3 users thanked Law Man for this post.
Tim D on 28/08/2017(UTC), Mickey on 28/08/2017(UTC), john brace on 28/08/2017(UTC)
Steeve139
Posted: 28 August 2017 11:52:11(UTC)
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Hi,

I think the number of holdings you have is fine for the overall amount. I might be tempted to reduce the size of the top 2 and increase one or two of the smaller holdings.

I also think that you are correct with the idea of him holding some bonds, or more precisely, bond funds. I would be tempted by high yield. 5% sounds good. And that means either Far East, Emerging markets, or small cap. Look for low volatility and low to medium costs.

It would be interesting to see whether any of the holdings of your holdings led to any concerning concentrations, or overlaps.

An ETF which I like but don't see in the list is IUKD. It holds the high yielding end of the FTSE components. And that is nice.

Well done for managing his SIPP. It should be him managing yours. ;-)
2 users thanked Steeve139 for this post.
john brace on 28/08/2017(UTC), Mike L on 03/09/2017(UTC)
Owen
Posted: 28 August 2017 13:11:23(UTC)
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Hi. I've been mulling over a similar issue for the future. My thought so far is that index funds - whatever mixture you think right of equity, bond and property trackers - would be the safest investment answer for someone who isn't going to take any interest. But that's assuming the beneficiary would be able to live on the natural portfolio yield without drawing any of the capital.

But given this is a SIPP, to do the best won't you also need to know what sort of drawdown profile your son will need or want ? And the tax issues round a SIPP, like taking the tax-free lump sum (or not) and his overall Lifetime Allowance position could mean the money should best be available to draw out at specific times, which would then alter what sort of investments to best hold ?

If your son is 53 and hasn't thought about these things, I'd think recommending he visit a financial planner would be the best first step. If you could get some idea how long the money may be in the SIPP you'd have a better starting point ?

Regards,

Owen
john brace
Posted: 29 August 2017 15:44:58(UTC)
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Many thanks for all your replies. Certainly something has to be done but its hard to know which IT's to sell! PCT will go as it overlaps SMT
I am looking at RLshort duration index linked bond and RL sterling extra yield bond. as purchases - . would add to CGT as it held up so well in 2008.
Steeve, I will look into far east bonds

- I am trying to stick with IT's as far as possible to keep HL charges down to £200 but
John Barron has IP enhanced income and twenty four select monthly income

Owen - Son is [unfortunately] not affected by lifetime allowance - will just have small db pension c £5000 and paying into dc pension with SL - at present £55000. I guess he will draw down a small sum each year so it should b e invested for some time..

'simple instructions' are the way to go, Law Man. they will have to be very simple.
Redundant (Old Timer?)
Posted: 29 August 2017 17:16:26(UTC)
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John,

Your son, Owen, will need to keep an eye on Lifetime Allowance (LTA), especially if he retires at 68 in the new era.

His DB pension will be valued at 20 times what he is paid in pension including any lump sum, thus his £5000 income equates to at least £100,000. But I presume his employer will be inflating that DB pension by at least CPI, if not RPI, over the next 12 to 15 years, so its LTA value will increase. (I also dangerously assume HMG will not increase the DB value multiplier again!) Also both his DC and SIPP will hopefully increase as well in that time.

At the moment LTA is fixed at £1million, but it is indexed from, I believe, 2019 by CPI. Unfortunately CPI is unlikely to exceed stock market gains, or be anywhere near them. So whilst he is safe now, closer to retirement he will need to be aware of LTA and check his position. You may want to put this on his instruction sheet.

1 user thanked Redundant (Old Timer?) for this post.
john brace on 29/08/2017(UTC)
Owen
Posted: 01 September 2017 12:59:58(UTC)
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Hi John. If no LTA risk (though I share Redundant's doubts about whether your son will necessarily stay in that position) wouldn't you still want to take the 25% pension commencement lump sum into account ? It's tax-free (present rules) and particularly if your son has a mortgage or other debts at "retirement" it wouldn't make sense to leave all the money in the SIPP generating taxable income when he draws it matched by non-tax-deductible interest payments, would it ? Better to take the lump sum and pay off the debts with it. But maybe you see his retirement as so far in the future that it doesn't need taking into account in your investment choices. For what it's worth, the further ahead you think his retirement is, the more i would prefer index funds as most future-proof answer for someone who isn't interested. Even investment trusts do lose managers and directors every now and then, so you can't get much confidence now in how they'll perform in 10 years' time, can you ?.I'd use index ETFs to keep the platform charges down.

Regards, Owen
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john brace on 01/09/2017(UTC)
Mr J
Posted: 03 September 2017 08:43:28(UTC)
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It is good you are thinking about this and trying to help your son. At your age I would suggest you should speak to him and agree a plan as soon as possible. He is old enough to be concerned about his own future now and will have to have some basic understanding himself and a good source of financial advice other than you. There is also the obvious question of whether he will receive inheritance and whether his ISA allowance is being used each year.

Hopefully he passes the marshmallow test and you feel you can have an adult conversation with him. It is a hard thing to do and easily put off again and again but in my experience becomes impossible once you fall ill. I hope you live happily to 100 but at 80 there is need to be prepared for the unexpected.

Perhaps you should be looking at HL portfolio services as an option.
john brace
Posted: 04 September 2017 08:20:59(UTC)
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Thank you all again for your comments
I'm beginning to realise that taking the 25% tax free lump sum [ if it's still available] is sound general advice Not sure if it would reduce the LTA limit - on reading other posts on the Forum, but a 'bird in the hand']
I wonder what HL financial advice would cost and will look into their portfolio services.[ They do push their own funds.]. Incidentally, the have just taken on transferring my daughter's DB pension to her SIPP, and she couldn't find anyone else cheaper, and they were very efficient.
'
Incidentally I'm a 'Mrs' John so may reach 100?!
Owen
Posted: 04 September 2017 09:40:30(UTC)
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Hello again, John.

No, taking the 25% lump sum doesn't affect the LTA position directly (its value will count against his LTA at date of crystallising the SIPP into drawdown whether your son takes it as lump sum or leaves it in the SIPP to be drawn as pension in future).

I'm assuming above that he would crystallise the SIPP all at once. But there are other options with SIPPs and one possible further LTA-related tax charge when your son reaches 75. SIPPs are not at all simple things at the taking-pension end of their "lives". It may be your son will be able to ignore all that if he stays permanently well below the LTA limit, but i'd strongly suggest a short session with a financial adviser or financial planner to understand broadly if he is going safely to be able to ignore the menu of choices and what his best route forward implies in terms of investment planning. I've found input from a financial adviser very useful even though i was a professional tax adviser myself (in a different area of tax). It's also very reassuring to know from that input that you haven't missed anything major.

Ig your son really needs to save paying an adviser's fees, you can piece the tax bits all together yourself from a SIPP provider's website and from HMRC's website, but it's a very big job to do so from scratch.

Regards,

Owen

john brace
Posted: 04 September 2017 11:13:46(UTC)
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Thanks Owen - answers the question of the tax free lump sum. I agree a financial adviser will be the way to go
jeffian
Posted: 04 September 2017 11:32:11(UTC)
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The thing that caught my attention about this thread was not the talk of the underlying investments but how to deal with the problem of passing on wealth to the next generation when they show little aptitude or even interest in managing it. (Mine are 30's rather than 50's, but same problem). Like John, I have done everything for them (maybe that's the problem!) and they have a range of investments including ISA's, stakeholder pensions, workplace pensions and investments held outside these 'wrappers' (but being moved into ISA's with annual allowance over time). I suppose on a 'needs must' basis we could swallow the idea of paying an IFA or 'wealth manager' to manage things on their behalf after I'm gone but who to trust and really it requires more than just investment advice but also tax planning etc. When I was a young man, I had a wonderful accountant to whom I could pick up the phone and chat through options etc, but after he retired I haven't found anyone of the same calibre. How does/would anyone else deal with this?
2 users thanked jeffian for this post.
john brace on 04/09/2017(UTC), gillyann on 06/09/2017(UTC)
Joe Soap
Posted: 04 September 2017 11:44:22(UTC)
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I'm trying to get my two off spring, 25 and 23, to show some interest in learning how to run their SIPPs/ISAs etc... But so far, failing dismally.
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Guest on 15/09/2017(UTC)
Owen
Posted: 04 September 2017 19:09:06(UTC)
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Hi Jeffian and John,

There is a type of financial adviser who call themselves "financial planner" who are what you want - will combine the various tax issues with the investment perspective and will planning if you want it. There is an Institute of Financial Planning which should be a good starting point for searching for one to suit you - their site comes up if you search on "financial planner". You will be able to get the specific one-off job of looking at the whole picture done for you without taking on continuing investment management fees. I completely agree the type of "financial adviser" who was basically an investment product salesman is no good to you for this.

Regards, Owen
3 users thanked Owen for this post.
john brace on 04/09/2017(UTC), Tim D on 04/09/2017(UTC), jeffian on 05/09/2017(UTC)
Tyrion Lannister
Posted: 04 September 2017 23:32:48(UTC)
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john brace;50683 wrote:
Thank you all again for your comments
I'm beginning to realise that taking the 25% tax free lump sum [ if it's still available] is sound general advice Not sure if it would reduce the LTA limit - on reading other posts on the Forum, but a 'bird in the hand']
I wonder what HL financial advice would cost and will look into their portfolio services.[ They do push their own funds.]. Incidentally, the have just taken on transferring my daughter's DB pension to her SIPP, and she couldn't find anyone else cheaper, and they were very efficient.
'
Incidentally I'm a 'Mrs' John so may reach 100?!


Hi John,

I've recently transferred a DB pension to an HL SIPP through Tideway (who charged 1%). About a year ago I asked HL and they said they wouldn't advise on, nor facilitate, the transfer adding that it was their policy to discourage DB transfers. Have they changed their position on this?
john brace
Posted: 05 September 2017 10:26:54(UTC)
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Hi Tyrone
You certainly had a good deal with Tideway - I'm guessing you had a large transfer to merit the 1%
Daughter had only £80000 to transfer and most firms wouldn't touch it - one wanted £4000. We found HL the cheapest at £2000- they advertise this service now - very thorough but said at the outset they wouldn't take it into SIPP if the recommendation was against.
I t felt a bit like the Spanish inquisition

I note now that the government is urging SIPPs to take DB transfers even when advised against, so it may be a lot easier in the future. Presumable they [government] is looking for the tax takes.
2 users thanked john brace for this post.
Tim D on 15/09/2017(UTC), Tyrion Lannister on 15/09/2017(UTC)
Mr Helpful
Posted: 05 September 2017 10:55:25(UTC)
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john brace;50683 wrote:

I wonder what HL financial advice would cost and will look into their portfolio services.[ They do push their own funds.]. Incidentally, the have just taken on transferring my daughter's DB pension to her SIPP, and she couldn't find anyone else cheaper, and they were very efficient.
'
Incidentally I'm a 'Mrs' John so may reach 100?!



Taking note of various comments, HL or Vanguard under the circumstances, might be the least worst options.
Doesn't look as though a suggested book reading list would be much use as unlikely to get read or contents digested.
The portfolio as observed is in need of some overall structural organisation.
1 user thanked Mr Helpful for this post.
john brace on 05/09/2017(UTC)
Steve U
Posted: 14 September 2017 22:04:26(UTC)
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john brace;50771 wrote:
Hi Tyrone
You certainly had a good deal with Tideway - I'm guessing you had a large transfer to merit the 1%
Daughter had only £80000 to transfer and most firms wouldn't touch it - one wanted £4000. We found HL the cheapest at £2000- they advertise this service now - very thorough but said at the outset they wouldn't take it into SIPP if the recommendation was against.
I t felt a bit like the Spanish inquisition

I note now that the government is urging SIPPs to take DB transfers even when advised against, so it may be a lot easier in the future. Presumable they [government] is looking for the tax takes.



charging a % of the transfer is common but not universal.
I am in the process of transferring a £3m DB pension and I agreed a fee of £5k.
Most SIPP providers will not accept insistent transferors - I.e if the advice is NOT to transfer - AJ Bell is one that will.
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