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How is my Sipp balanced in retirement now?
Samual Saunders
Posted: 01 May 2018 14:53:15(UTC)
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My recent changes to funds in my Sipp and Drawdown accounts now have 5 holdings in a spread through Artemis High Income and Strategic Bond, JO Hambro UK Equity Income and LT UK Equity and well as LT Global equity. Respectively, the five hold around £53.75k - £53.75k - £72.2K - 90.4k and £90.4k.

Together they make up a combination of UK Shares 48.0% - International Shares 22.7% - International Bonds 14.3% - UK Bonds 8.9% - Cash & Equivalents 3.1% - U Gilts 1.6% - Property 0,5% and Investment Trusts 0.4%

This Sipp & Drawdown had a value of £265k in 2012 and is now around £366k having taken ad-hoc drawings of £60k but nothing on a regular basis. State incomes and other assets plus taking £20k pa from the Drawdown each year, as well as drawing on other liquidity of £180k meets most needs and I consider our home as the Property aspect of assets.

With my limited knowledge and the help of peeks at this forum and others, I have been selecting various funds and decided that the above is be better than my Invesco Perpetual holdings that have been rather basic in the last few years. I did select them myself and am presently with HL, although the higher charges are making me question if I should move, but it is a good site and very easy to get around.

Although I chose these after some research, my knowledge is limited but I now feel that perhaps I should have looked harder in some cases and am possibly overweight in Bonds, but also may need to spread wider.

We are both age 77, but who knows when the perch will start to slip, but we are in reasonably good health and enjoy 3 or more holidays a year.

Any constructive help or suggestions would be welcomed from the ranks of such fine members of this interesting forum to perhaps move me forward in understanding and getting better returns in future, but I think I have been put off Investment Trusts at present.
Sam.
Jenki
Posted: 01 May 2018 17:04:14(UTC)
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All looks good to me but would there be possible a large inheritance tax bill for your dependents? Especially when you mention your home as well.

BPR business property relief may be something to look at. It is a tax relief that lets investors avoid inheritance tax liability. You have to invest in aim shares, and hold them for a minimum of two years.

Obviously aim is volatile, therefore I would look at the Hawksmoor aim portfolio service. Hawksmoor are cautious on all there funds.

You can enjoy tax free growth and dividends within an isa, when alive. Then pass them on free of inheritance tax when you pass away.

Whats not to like about it?
Joe 90
Posted: 01 May 2018 19:52:00(UTC)
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You are 70% invested in equities yet you say you are overweight in bonds! Using even the racy 120 minus age rule at the age of 77 you should be only 43% equities. Could you cope with a 40% fall in the market?
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Tim D on 01/05/2018(UTC), Samual Saunders on 01/05/2018(UTC)
Samual Saunders
Posted: 01 May 2018 19:55:09(UTC)
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Thank you Jenki.

It's good to know that you feel it is balanced OK as I had my doubts with so much in Bonds and
did not think there was enough spread, but perhaps others would also give their opinion, as it would reassure me.

I have the IHT well covered with suitable Wills and some investments written in Trust now, so all growth is not adding to the estate value and the complete funds can be accessed before Probate to pay any tax quickly, so not a problem there.

At my age, AIM investments are not a consideration and in any event, I have never considered such high risk investments for anything, even at a much earlier age. Perhaps if one could afford the complete loss, but not me.

The ISA's are part of the estate as it's only the interest which is tax free, but at least new rules would allow either of us to pass the individual ISA amount to the surviving spouse to include in their assets.

Sam
Samual Saunders
Posted: 01 May 2018 20:36:52(UTC)
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Joe 90;61582 wrote:
You are 70% invested in equities yet you say you are overweight in bonds! Using even the racy 120 minus age rule at the age of 77 you should be only 43% equities. Could you cope with a 40% fall in the market?


Thanks Joe90.
I didn't know what the 100 or 120 rule was but have just looked it up and am a little wiser now.

With a reasonable amount of other liquidity, I could accept a fall for a couple of years but feel that in the present climate, it is possible that the next couple of years will not show such a decline. I'm only going by what I read on forums such as this, but appreciate that on present allocation, I am high on Equity FUNDS within the various 5 selections, not Shares as I printed.

I apprecaite your help and it makes me want to look more closely and dig a little more into the fountain of knowledge here and elsewhere.
Sam
Tom Bards
Posted: 01 May 2018 22:42:19(UTC)
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I would say you are seriously overweight UK. UK is only really about 4% of the world economy yet in your portfolio it makes up 44%.
Tim D
Posted: 01 May 2018 23:22:38(UTC)
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Tom Bards;61589 wrote:
I would say you are seriously overweight UK. UK is only really about 4% of the world economy yet in your portfolio it makes up 44%.


But when you buy the UK market, you're not just buying the UK economy... you're more buying all the economies the UK trades with (if that wasn't true, the pounds' fall wouldn't have such a strong positive effect on the FTSE100 etc).

FTSE100 revenues

So it might not be quite as bound up with purely the UK economy as that 4% vs 44% suggests... depends rather on the details of fund holdings, whether managers have chosen to overweight more domestic focussed stocks and shunned internationals.
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Captain Slugwash on 01/05/2018(UTC), Guest on 02/05/2018(UTC)
Tom Bards
Posted: 01 May 2018 23:53:11(UTC)
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True, good point.


Perhaps the discrepancy is not quite as large but I would still say 44% weighted towards so-called 'UK focused' funds is a bit on the high side. But as you say, I don't know the exact holdings, on a quick glance the top holdings look fairly international.

Still why buy UK funds for international exposure, may as well just buy a global fund for proper exposure i.e. stocks listed on the different exchanges. I understand the counter to this will be that these UK listed stocks are basically the same because they are global companies but my preference when choosing between Lindsell Train Global and Lindsell Train UK would always be the former if I wanted global exposure.
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Tim D on 02/05/2018(UTC)
Samual Saunders
Posted: 02 May 2018 05:36:02(UTC)
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So far, thank you all for your comments. It does seem that the UK is overweight and this is exactly where I needed clarification and I was not too careful of when selecting the funds.

Not a problem as I can easily make some changes once the fog begins to clear, which it is starting to so I do appreciate all the guidance. In 'balancing the books', perhaps another couple of funds to help diversification would be good and if so, any suggestions would help and possibly bringing in other areas like Japan?

This will all be useful when I start changing ISA's and other investments as I have only been looking at my pension funds so far

Sam
Keith Hilton
Posted: 02 May 2018 07:38:49(UTC)
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Samual Saunders;61593 wrote:
This will all be useful when I start changing ISA's and other investments as I have only been looking at my pension funds so far


You may find it beneficial to keep higher yielders in the ISA's, if you intend taking an income from them.
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Samual Saunders on 02/05/2018(UTC), Tim D on 02/05/2018(UTC)
Samual Saunders
Posted: 02 May 2018 08:08:01(UTC)
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Thanks Keith but I don't take income and only tend to take lump sums as required, usually fot the next cruise, car change or whatever, but I appreciate your thoughts.
Sam
Malcolm Beaton
Posted: 02 May 2018 09:26:44(UTC)
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Hi
In something of the same situation but only 71!
Sell in chunks as required to replenish my cash float as you appear to do
Have moved from Investment Trusts to Index Trackers for cost savings and simplicity-cognitive impairment with age and simpler for financially less literate wife(men die first!)
Down to a 3 Fund only Portfolio-simple-going to one fund ie a LifeStrategy Fund a possibility on the final stretch when 80+
Seems to work for me
xxd09
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Tim D on 02/05/2018(UTC), Bellabeck on 02/05/2018(UTC), Samual Saunders on 02/05/2018(UTC), mcminvest on 04/05/2018(UTC), Mike L on 06/05/2018(UTC)
Tim D
Posted: 02 May 2018 10:05:42(UTC)
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Samual Saunders;61593 wrote:
In 'balancing the books', perhaps another couple of funds to help diversification would be good and if so, any suggestions would help and possibly bringing in other areas like Japan?
Sam


Beware of thinking you have to add a little bit of this and a little bit of that. Before you know it you've just recreated a global tracker... but a more expensive and fiddly one.

IMHO better to start from the position of "if I had a global tracker, would I be unhappy with it? (And if so, why?)". For example, scroll down this page for Vanguard's Global All Cap Index fund's country diversification. That's 8.4% Japan. If you think that's too much, or too little (and same question for any of the other things there)... why?
2 users thanked Tim D for this post.
Samual Saunders on 02/05/2018(UTC), mcminvest on 04/05/2018(UTC)
Law Man
Posted: 03 May 2018 16:38:34(UTC)
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Previous posts make good comments, so I shall just add:

1. Bonds: For me the only bonds I hold are short duration ( little interest rate/ duration risk) and index linked; if you wanted safer assets look at wealth preservation funds/ ITs; not TAR funds ( in my view).

2. What is your investment period? You seem to have sufficient elsewhere for your life time needs, so it seems to be a matter of investing capital for the long term for your dependents.

3. Make sure you have delivered a Memorandum of Wishes to the SIPP nominee; and left instructions to the beneficiaries as to how to administer the fund.

3 users thanked Law Man for this post.
Samual Saunders on 03/05/2018(UTC), Jenki on 03/05/2018(UTC), Mike L on 06/05/2018(UTC)
Samual Saunders
Posted: 03 May 2018 16:49:18(UTC)
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Law Man;61672 wrote:
Previous posts make good comments, so I shall just add:

1. Bonds: For me the only bonds I hold are short duration ( little interest rate/ duration risk) and index linked; if you wanted safer assets look at wealth preservation funds/ ITs; not TAR funds ( in my view).

2. What is your investment period? You seem to have sufficient elsewhere for your life time needs, so it seems to be a matter of investing capital for the long term for your dependents.

3. Make sure you have delivered a Memorandum of Wishes to the SIPP nominee; and left instructions to the beneficiaries as to how to administer the fund.




Thank you for your input.

I have dealt with the Memorandum of Wishes, as indicated earlier, but as for 'investment period', although other assets are available, even loans to a Trust that can be recalled if needed, I know I will need to occasionally dip into the drawdown to support our 'nice holidays', which we hope to have for the years ahead.

I was really looking for added support and suggestions on what funds I have selected, the proportion they each hold and if the balance was reasonable for someone like me/us. I don't have the expertise that many members here do and it's nice to hear words from the 'mouth's of the horses'.

Sam
paul armstrong
Posted: 03 May 2018 17:36:42(UTC)
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Difficult without knowing time horizon and attitude to risk. At 77, fair chance one of you will get to near 100. Perhaps consider that you may take out an annuity at some stage and therefore need protection against markets ?

Yes, to my eyes you are well overweight UK.

In terms of equity weight, heard you should take the largest fall you could stomache, double it and add 10 ! So 40% if a 15% decline would cause you pause.

Not keen on ITs at the moment owing to costs, which now are looking high, and discounts which are narrow. Small discounts plus gearing will amplify any downturn.

If you are with HL, you could buy a gilt and hold direct till maturity. Costs much lower and no interest rate risk if the view was to maybe buy an annuity in the timeframe it matures.
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mcminvest
Posted: 04 May 2018 11:19:57(UTC)
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Tim D;61605 wrote:
Samual Saunders;61593 wrote:
In 'balancing the books', perhaps another couple of funds to help diversification would be good and if so, any suggestions would help and possibly bringing in other areas like Japan?
Sam


Beware of thinking you have to add a little bit of this and a little bit of that. Before you know it you've just recreated a global tracker... but a more expensive and fiddly one.

IMHO better to start from the position of "if I had a global tracker, would I be unhappy with it? (And if so, why?)". For example, scroll down this page for Vanguard's Global All Cap Index fund's country diversification. That's 8.4% Japan. If you think that's too much, or too little (and same question for any of the other things there)... why?



Thanks Tim, looks a good fund!
Peter Sm
Posted: 06 May 2018 10:58:55(UTC)
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At 77enjoy ice and start spending more if your money and stop worrying about investments and take 6 holidays a year and treat your family!! Stop worrying about investments, put them all in one Global fund with 0.2% charge and drawdown 30k a year and blow some.
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Samual Saunders on 06/05/2018(UTC), mcminvest on 06/05/2018(UTC), Jenki on 06/05/2018(UTC)
Samual Saunders
Posted: 06 May 2018 11:50:47(UTC)
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Thanks Peter,

we are enjoying our holidays and particularly cruises, which cost two or three times as much as the normal land hop. Too many holidays may not leave enough to look forward to and it's nice to think that there will be a 'pile' for the two children after IHT.

The one problem could be long term care if we were both unlucky enough to suffer that for a number of years, unless we can get a 'pill' for the problem.

Reasonably happy with the comments and suggestions so far and intend to make a few 'tweaks' to the initial selection, particularly since too heavy in UK and IMO Bonds

Sam
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JohnW on 06/05/2018(UTC)
JohnW
Posted: 06 May 2018 18:23:57(UTC)
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Peter Sm;61821 wrote:
At 77enjoy ice and start spending more if your money and stop worrying about investments and take 6 holidays a year and treat your family!! Stop worrying about investments, put them all in one Global fund with 0.2% charge and drawdown 30k a year and blow some.


It's interesting, but there can be a number of reasons why that advice will not be followed in my case.
I'm 2 years younger at 75. I'm not really interested in 6 holidays a year. In fact I've not gone away on holiday for 20 years. I'm out working in the countryside with friends every week, and sometimes several days during the week and this is what I enjoy.
I don't worry about investments and certainly would not want everything in one fund. I enjoy researching investments and trying to improve my portfolio.
So you might ask, "What am I saving and investing for?" Several reasons. My pension is adequate for my needs, which includes running both a car and truck. But it may be that at some point in the future inflation will eat into my pension and I may need to use some of my savings. Then of course there is always the possibility of at some time needing long term care. My house is my own, but it is always on the cards that expensive maintenance work may be needed at some point. Then comes a rather frivolous reason. Having worked on a factory floor on relatively low wages all my working life, I have this silly aim to see my total worth reach a certain figure before I die. Will I make it? Nothing depends on it but it would be nice, and knowing I am financially secure removes so much worry :)

John
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Samual Saunders on 06/05/2018(UTC), Luca Brasi on 06/05/2018(UTC), mcminvest on 07/05/2018(UTC)
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