SIPP's and tracker funds

[Halitosis]

This is the fund my recently started pension with Aviva is allocated to. It's the default fund and is relatively low risk. Thoughts and observations from those in the know much appreciated.

Certainly no expert, and all that matters is that you're happy with it matching your risk appetite and situation. It appears to be 60% in bonds and gilts, which are usually less risky/volatile, so if you're a "safe and steady wins the race" type, or perhaps not too far off wanting to start withdrawing the pension funds, then it should serve you well. Might be worth checking to see if the pension has "lifestyling" - which automatically moves a client's funds into bonds/gilts and cash over the final 10 years before retirement. This is a good option for someone who intends to buy an annuity on retirement, but perhaps not if they intend to leave it invested into older age and/or drawdown in bite-size pieces (think this may have been mentioned by someone earlier in the thread).

Usually pension providers enable one to change the funds they're invested in at no cost (often a few clicks on their app or website) so if you decide at any point you'd rather switch some or all of your funds or contributions, then that should be easy to do too.

[Halitosis]

Benchmark performance shown in our tables and charts is for comparison purposes only and is based on Total Returns, which
assumes the reinvestment of any income. The benchmark will not include any costs and charges that apply to the Fund, which could be
a reason why the performance of the Fund may not exactly match the performance of the benchmark.

Benchmark constituents:
- From 01/11/2023: 44% MSCI World Index, 44% MSCI World Index GBP Hedged, 12% MSCI Emerging Markets
- From 16/03/2018 to 31/10/2023: MSCI All Country World Index
- Prior to 16/03/2018: 30% FTSE All-Share Index & 70% FTSE AW - All World (ex UK) Index (75% hedged)

Yes clearly the fund provider has changed its own benchmark a couple of times over the years so its difficult to directly compare. The new benchmark appears to be a pro-rated average of three global indexes so performance from this year should be closer to the benchmark (i.e. the benchmark being more appropriate, not that your fund will suddenly perform better!).

To be fair, I think your fund of funds is just what I would take if it were available to me: it includes emerging markets such as India etc., which overcomes the lack of exposure a straightforward MSCI World tracker carries as explained so clearly by Montello. The US has had an incredible period of growth, but the better question is where the next growth will occur.

[Montello]

... but the better question is where the next growth will occur.

Ah ... if you know please advise as that is the big question ... usually not the sector that has just enjoyed a big melt up ...

The bottom line is no one knows so the best you can do is diversify ... as they say its the only free lunch in investing.

I can't help but think the industry deliberately tries to make this stuff as opaque as possible leading to people losing interesting allowing the industry to underperform for clients and bump up their own fees. All that mucking about with the benchmark above, how is that helping anyone make a comparison?

Note the bonds sector has impacted a lot of pensions recently with automatic "life styling" making matters worse not better ...

https://www.telegraph.co.uk/money/pe...nsion-savings/

https://www.express.co.uk/finance/pe...-crash-savings

[Halitosis]

Ah ... if you know please advise as that is the big question ... usually not the sector that has just enjoyed a big melt up ...

Ha - I have as good an idea as the industry experts - i.e. none.

My (often proved poor) instinct suggests the US can't continue rising at the rate it has/is, so a well diversified global portfolio.

[Montello]

For the Vanguard users there is an App called Sentinel that is useful to see at a glance returns:

Thanks for that recommendation, useful, bit basic and limited to 6 funds which is just enough for my needs.

I believe Vanguard will be rolling out an app this year ... bit strange they don't have one in the UK, they do in the USA.

[T1ckT0ck]

Thanks for that recommendation, useful, bit basic and limited to 6 funds which is just enough for my needs.

I believe Vanguard will be rolling out an app this year ... bit strange they don't have one in the UK, they do in the USA.

Vanguard’s website is pretty good but i have been waiting on an app so glad to hear it’s finally on the way.

[Montello]

Vanguard’s website is pretty good but i have been waiting on an app so glad to hear it’s finally on the way.

https://www.ftadviser.com/investment...-uk-investors/

in the USA

https://investor.vanguard.com/client...ts/mobile-apps

[beechcustom]

Certainly no expert, and all that matters is that you're happy with it matching your risk appetite and situation. It appears to be 60% in bonds and gilts, which are usually less risky/volatile, so if you're a "safe and steady wins the race" type, or perhaps not too far off wanting to start withdrawing the pension funds, then it should serve you well. Might be worth checking to see if the pension has "lifestyling" - which automatically moves a client's funds into bonds/gilts and cash over the final 10 years before retirement. This is a good option for someone who intends to buy an annuity on retirement, but perhaps not if they intend to leave it invested into older age and/or drawdown in bite-size pieces (think this may have been mentioned by someone earlier in the thread).

Usually pension providers enable one to change the funds they're invested in at no cost (often a few clicks on their app or website) so if you decide at any point you'd rather switch some or all of your funds or contributions, then that should be easy to do too.

Thanks for the reply Sir, much appreciated.

[LukeBird]

I believe you can have both DB and DC if you wish, could set up a SIPP. If hypothetically you're a higher rate tax payer, , putting 5k annually in a LISA costs you 4k, whereas putting 5k annually in a DC pension would cost you 3k. Worth a thought although may not be right for you of course.

Yeah I think you’re right.
It doesn’t work for me unfortunately, but at least I can get some ‘free money’ from the LISA government contributions.
I’m still fairly young, so always worthwhile looking into these things early!

[trident-7]

Yes clearly the fund provider has changed its own benchmark a couple of times over the years so its difficult to directly compare. The new benchmark appears to be a pro-rated average of three global indexes so performance from this year should be closer to the benchmark (i.e. the benchmark being more appropriate, not that your fund will suddenly perform better!).

To be fair, I think your fund of funds is just what I would take if it were available to me: it includes emerging markets such as India etc., which overcomes the lack of exposure a straightforward MSCI World tracker carries as explained so clearly by Montello. The US has had an incredible period of growth, but the better question is where the next growth will occur.

I'm probably overexposed to India a bit...but sometimes you have to go with your gut.....surely it can't be as arse clenching as Bitcoin.

[robinsongreen68]

off the back of this i looked into the compositon of my index tracker, the vanguard world index (VWRP). i'd been thinking about shifting more to the US, but on checking VWRP seems to be 66% US already! guess i don't need more exposure...

[Montello]

off the back of this i looked into the compositon of my index tracker, the vanguard world index (VWRP). i'd been thinking about shifting more to the US, but on checking VWRP seems to be 66% US already! guess i don't need more exposure...

Aye most World Trackers are US dominated because the US dominates world markets ... what's your thinking about wanting more US focus??? Currently at all time highs ...

I did some analysis on this in post #21 https://forum.tz-uk.com/showthread.p...=1#post6372260

[robinsongreen68]

yes, but as warren buffett says, there's never been a good time to bet against the S&P.
i dunno, i realise valuations are high but on a 5-10 year horizon im not sure there's a better bet...

[Montello]

yes, but as warren buffett says, there's never been a good time to bet against the S&P.
i dunno, i realise valuations are high but on a 5-10 year horizon im not sure there's a better bet...

True, he also says buy low sell high ...

[uwtc]

I prefer 'buy high, sell higher'. Cheap usually remains cheap for much longer than anyone expects and you just pay opportunity cost.

[Montello]

I prefer 'buy high, sell higher'. Cheap usually remains cheap for much longer than anyone expects and you just pay opportunity cost.

Yep, that works too ... just buy high sell low you need to avoid ...

[robinsongreen68]

i feel i have zero ability to time the market. after 2008 i remember people telling me there was way more volatility still to come, which at the time seemed very plausible. i parked a lot of savings in cash and missed a lot of the huge bull run that followed.
it almost feels like theres a huge backstop to markets now, because central banks have shown that if anything really massive/systemic happens, they will cut rates and/or use QE to bail everything out

[Montello]

i feel i have zero ability to time the market.

So do we all ... if we could do that with any reliability we'd all be minted ... it's difficult and most fund managers can't do it so there is no reason to think I could ... I have tried ... I'm on a 2 win 1 loss attempt and I'm not doing it any more ... last one was painful ...

[Halitosis]

78% of the stock market’s best days occur during a bear market or during the first two months of a bull market. If you missed the market’s 10 best days over the past 30 years, your returns would have been cut in half. And missing the best 30 days would have reduced your returns by an astonishing 83%.

source

As the phrase goes, time in the market beats timing the market (or trying to)

[uwtc]

Agree with you both regarding long term passive investing but there is an ancient bit of wisdom which needs minimal engagement that has historically protected against the worst of each cycle's downturns - Sell your holding when it falls below its 200 day moving average and buy when it rises above.

[Montello]

Agree with you both regarding long term passive investing but there is an ancient bit of wisdom which needs minimal engagement that has historically protected against the worst of each cycle's downturns - Sell your holding when it falls below its 200 day moving average and buy when it rises above.

I follow a multi asset fund that uses a trend following algorithm like that. The performance has been dire.

Are you trading your pension on these cross overs?

[uwtc]

Relative to? I'm referring specifically to stocks. I don't know if it works for any other asset.

[Montello]

Relative to? I'm referring specifically to stocks. I don't know if it works for any other asset.

I assume the logic would apply to a stock index just as it would and individual stock?

Seems very simplistic to me.

[uwtc]

Yes, you said your fund was multi-asset which could include bonds/commodities/property etc. So what's the dire performance relative to?

[Montello]

Yes, you said your fund was multi-asset which could include bonds/commodities/property etc. So what's the dire performance relative to?

I don’t want to name the fund but it’s given 0% over 7 years, pick your benchmark.

It does include bonds, commodities and REITs. It would have done ok without the trend following function.

[uwtc]

REIT's are illiquid so I can't see how the fund can follow the 200 day rule particularly accurately when the proverbial hits the fan but as I'm not in a position to see the data I shall take your word for it.

[Montello]

REIT's are illiquid so I can't see how the fund can follow the 200 day rule particularly accurately when the proverbial hits the fan but as I'm not in a position to see the data I shall take your word for it.

I’ve pm’ed you the details.

[robinsongreen68]

This is the kind of thing that's been making me want to increase my US exposure.

From today's FT:

the US economy has become a lot less confusing. The economy is growing roughly at, or possibly a bit above, its long-term potential. Inflation is not back to target, but it’s close. Consumer confidence, long depressed and much debated, has in recent months begun to rise.*Most importantly, sectoral shifts and supply shocks have settled down. The New York Fed’s global supply chain disruption index has been bang in line with the long-run average since November 2023, shrugging off a clogged Panama Canal and war-stricken Red Sea.


given a 'normalised' US economy, with inflation under control, and interest rates surely trending downward, it's hard for me to see why share prices would tank. (obviously, i dont know anything...)

[uwtc]

This is the kind of thing that's been making me want to increase my US exposure.

From today's FT:

the US economy has become a lot less confusing. The economy is growing roughly at, or possibly a bit above, its long-term potential. Inflation is not back to target, but it’s close. Consumer confidence, long depressed and much debated, has in recent months begun to rise.*Most importantly, sectoral shifts and supply shocks have settled down. The New York Fed’s global supply chain disruption index has been bang in line with the long-run average since November 2023, shrugging off a clogged Panama Canal and war-stricken Red Sea.


given a 'normalised' US economy, with inflation under control, and interest rates surely trending downward, it's hard for me to see why share prices would tank. (obviously, i dont know anything...)

As others have said no one knows how the stock market will behave one day to the next, let alone months and years in advance but a couple of potential flies in the ointment might be the good news is already priced in (stock markets are forward looking) and that with the rest of the US economy picking up we simply see a rotation out of the Mag 7 that have been almost solely responsible for the huge rally into other sectors meaning the indexes as a whole underperform.

[Montello]

Who knows. But with record high levels maybe all the good news is already priced in.

[Montello]

As others have said no one knows how the stock market will behave one day to the next, let alone months and years in advance but a couple of potential flies in the ointment might be the good news is already priced in (stock markets are forward looking) and that with the rest of the US economy picking up we simply see a rotation out of the Mag 7 that have been almost solely responsible for the huge rally into other sectors meaning the indexes as a whole underperform.

Your inbox is full ...

[M1011]

How are people reacting to the ever moving Lifetime Allowance goalposts? Don’t particularly care which route they go, but it’s tricky to plan long term around it. Are folk assuming they stay as-is or assuming it’ll be back in the next cycle?

[robinsongreen68]

As others have said no one knows how the stock market will behave one day to the next, let alone months and years in advance but a couple of potential flies in the ointment might be the good news is already priced in (stock markets are forward looking) and that with the rest of the US economy picking up we simply see a rotation out of the Mag 7 that have been almost solely responsible for the huge rally into other sectors meaning the indexes as a whole underperform.

right, that does make sense. anyway as i started off saying, VWRP is giving me 66% US exposure as it is. now i'm wondering if i need more diversification!

[Montello]

How are people reacting to the ever moving Lifetime Allowance goalposts? Don’t particularly care which route they go, but it’s tricky to plan long term around it. Are folk assuming they stay as-is or assuming it’ll be back in the next cycle?

Trying to predict future political moves makes forecasting markets look easy ...

.... now i'm wondering if i need more diversification!

If only we knew ... I guess it gets easier to think ... would I buy a load of Apple stock now at the current levels, then move on the Meta and so on ... the Magnificent 7 really have had a good run ...

[murkeywaters]

Just picked up on this very informative thread.

I have a frozen pension with Prudential that I want to transfer and start adding to over the next 10 years, the transfer figure comes to about £20k so nothing much in the world of pensions but hoping I can top this up and in the process, save on some tax and learn a lot more about investing in different indexes/funds.

Vanguard are my first port of call and I can see plenty of people here have experience with them, I see they have a managed SIPP with slightly higher fees and a do it yourself SIPP, the DIY route still looks to have set funds in different percentages so its a bit like a set menu rather than an individual choice of funds, does that make sense?

Any advice from other VG investors would be very welcome and hopefully I can get this £20k working better for me and learn a lot in the process..

[RustyBin5]

Staggered that all the talk in this thread is about fees and returns only. Quite how you can select any kind of fund, asset class or equity sectors without first ascertaining your risk appetite is beyond me. Get your risk score and start there otherwise you’ll end up bemoaning that you have unsuitable funds further down the line.

[Kingstepper]

Staggered that all the talk in this thread is about fees and returns only. Quite how you can select any kind of fund, asset class or equity sectors without first ascertaining your risk appetite is beyond me. Get your risk score and start there otherwise you’ll end up bemoaning that you are unsuitable funds further down the line.

Managed so far w/o a risk score. Same goes for credit score TBH - made up metrics to create business for advisors and such like.

[murkeywaters]

Staggered that all the talk in this thread is about fees and returns only. Quite how you can select any kind of fund, asset class or equity sectors without first ascertaining your risk appetite is beyond me. Get your risk score and start there otherwise you’ll end up bemoaning that you are unsuitable funds further down the line.

I quite like an adventurous investment and have other pensions so this SIPP will be on the higher risk/reward end, also only looking to invest for 10/15 years so its not got a huge amount of time to grow hence the higher risk factor.

[trident-7]

Staggered that all the talk in this thread is about fees and returns only. Quite how you can select any kind of fund, asset class or equity sectors without first ascertaining your risk appetite is beyond me. Get your risk score and start there otherwise you’ll end up bemoaning that you have unsuitable funds further down the line.

Serious question...what's a risk score?

[M1011]

Was someone sold a risk score

[Halitosis]

I’ve never had a risk assessment/score performed but have a very good idea of my personal risk appetite. TBH if a risk assessment came up with a result that varied from my own perceived appetite then I would likely assume them to be wrong.