SIPP's and tracker funds

[Linocut]

Not wanting to derail Ryan's BTL thread, the chat about trackers and interest rates caught my attention.

What funds are returning 6% plus at the moment? Not really over the moon with my current workplace pension performance.

A couple of colleagues suggested St James's place, but the fees look horrendous, especially the entrance fee when so close to retirement.

[Ikincooper]

Most American funds have performed well recently. Don’t quote me, but I believe that the S&P500 has returned 10%+ on average for decades and decades, so well ahead of the 6% you’ve mentioned.

I’m no expert but I do choose my own pensions funds (would prefer ETFs but not an option the providers I’m with).

The 4 funds I hold via my main pension provider Aegon are:
TEC-Aegon/Scottish Equity Texhnology
AFA-Scottish Equitable Axa Framlington American Growth
XHS-Aegon HSBC Life Islamic Global Equity Index
IEI-Scottish Equitable Invesco Global Equity Income

In my NEST pension I go with the below fund based on its risk exposure and performance versus the only other options I could see:
NEST Sharia Fund

I’’ve got a new Pension (new job) with Royal London and went with the below as initial choices to get me away from the defaults…
RLP/Blackrock ACS US Equity Index
RLP/HSBC Islamic Global Equity Index

I’d strongly recommend watching some YouTube video by Damien Talks Money if you fancy upskilling, not only on pensions but on all things financial. He does have some pension google sheets that list some recommended funds by all the most popular pension providers and believe the below video gives details. (I’m in no way affiliated!)

https://youtu.be/lP30qVRLyTY?si=oFg6YgyQYrAu-LU3


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[alfat33]

Good advice above. Whatever you do, don’t go near St. James’s Place. You don’t need to be an investment guru or speculator, just learn the basics of how it all works and start off slowly to get the hang of it.

[Franky Four Fingers]

Im with SJP and over the last 3 months my investments have gone up over 12% , i have a 40% assets in North America.

[Gerald Genta]

My investments in an S&P tracker fund have increased by 11.7% in the last three months. SJP are quite widely used but in my experience they are very expensive compared to other IFAs. I would certainly be wanting a return greater than a tracker fund.

[mr noble]

SJP should be ashamed of themselves. They ought to be the next PPI scandal, with the fees they’ve ripped their “customers” off with over the years. Unbelievable that they’ve got away with it for so long.

My parent’s neighbour was singing their praises a few years ago and I told my Dad about their ridiculous fees. Dad must have told him ad he asked me to explain in more detail, so I ran him a computation of what his pension would be worth with similar investments over the last 30 years with Vanguard instead of SJP. He was stunned to hear that there was over £100,000 difference. Just due to the crazy high SJP fees and how compound interest affects investments over long timeframes.

He was gobsmacked.

Avoid SJP and similar scam companies at all costs!!

[mr noble]

S&P500 has done 14% per year over the last 5 years.

Although the vast majority of that has been from the super 7.

Over the last 100 years, nothing has really outperformed the SPX. (Except Bitcoin).


https://www.nasdaq.com/articles/wait...y-you-probably

[bambam]

Unless you want some kind of active management, then a combination of Vanguard trackers will do the trick. You can pick what % of each you’d like - US; emerging markets, high yield etc, or, just pick one of their funds that has a simple % of it in equities. They do splits like 80/20 where 80% is in equities.

To go this route, simply see if their funds are available via your work pension or your SIPP provider and if it’s a SIPP then pick a platform with flat fees.

[Halitosis]

SJP are an FA and not an IFA - an important distinction omitting the “independent”.
Also a rising tide lifts all boats so even poorly managed funds with extortionate fees will have done well in recent times.
Self invested global tracker set and forget in my opinion.

[daveyw]

How high are SJP fees? My IFA annual management charges are 0.8% and shopping around I can’t find lower
Are the majority suggesting going with no IFA and putting it all in SIpP’s?

[Franky Four Fingers]

SJP should be ashamed of themselves. They ought to be the next PPI scandal, with the fees they’ve ripped their “customers” off with over the years. Unbelievable that they’ve got away with it for so long.

My parent’s neighbour was singing their praises a few years ago and I told my Dad about their ridiculous fees. Dad must have told him ad he asked me to explain in more detail, so I ran him a computation of what his pension would be worth with similar investments over the last 30 years with Vanguard instead of SJP. He was stunned to hear that there was over £100,000 difference. Just due to the crazy high SJP fees and how compound interest affects investments over long timeframes.

He was gobsmacked.

Avoid SJP and similar scam companies at all costs!!

I keep on reading this but unless im missing something I don’t see where theyre ripping me off?
When i went with them a few years ago i posted on here and similar was said, I looked in to all the major players and they were all roughly the same give or take a few 0.01%. As of 24-25 they are also changing their charging structure to make it clearer in what they actually charge.
Unless they are deliberately hiding some hidden charges i dont know about?

For me it was a no-brainer, i had 6 pensions spread over 5 pension companies and if i turned up my clogs my missus would have had a right ballache sorting it out. Now its all in one place, i can see whats going on, i have 2 meetings a year and i can change at them drop of a hat with no exit charges.

[Ikincooper]

How high are SJP fees? My IFA annual management charges are 0.8% and shopping around I can’t find lower
Are the majority suggesting going with no IFA and putting it all in SIpP’s?

On the fees front, I honestly have no idea however yes I believe that many (myself included) are suggesting no IFA and then picking your own funds/trackers/ETFs via a SIPP.

It’s very rare for a managed fund to beat the index it’s trying to beat, hence the advise to use trackers/ETFs as not only will these likely perform best but they tend to also have the lowest fees which over years and years does make a huge difference due to compounding.


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[T1ckT0ck]

Vanguard SIPP annual fee 0.15% and that’s capped at a maximum of £375.

I hold just a single Vanguard index tracker fund that has a 0.23% fee.

Clear and concise, pretty cheap too.

[alfat33]

I keep on reading this but unless im missing something I don’t see where theyre ripping me off?
When i went with them a few years ago i posted on here and similar was said, I looked in to all the major players and they were all roughly the same give or take a few 0.01%. As of 24-25 they are also changing their charging structure to make it clearer in what they actually charge.
Unless they are deliberately hiding some hidden charges i dont know about?

For me it was a no-brainer, i had 6 pensions spread over 5 pension companies and if i turned up my clogs my missus would have had a right ballache sorting it out. Now its all in one place, i can see whats going on, i have 2 meetings a year and i can change at them drop of a hat with no exit charges.

If you have done your research and you are happy with them, that’s fine. You have probably
already paid their high upfront fees anyway. They apparently reduced their prices recently after scrutiny from the regulator.

If you google ‘SJP investigation’ you’ll get some sense of why I and others avoided them.

[Estoril-5]

I would avoid SJP, they have (had) a license to print money.

If you want to know more about how to pick your investments, you could do a lot worse than this book;

https://www.amazon.co.uk/Investing-D.../dp/0273781340

[Tifa]

Ex IFA here

Something to remember before investing money:
Costs are certain, investment performance isn't.
Pay VERY close attention to fund, management and advice charges.

[Estoril-5]

https://theescapeartist1.substack.co...ortance-of-low

[ryanb741]

I have 60% of my Sipp in a HSBC FTSE World Index Tracker via HL. 0.13% management charges on top of the HL platform fee, it's done really well for me.

[Neil.C]

I moved my private pensions over to Sipps when they came out and went with no trackers and and a fairly exciting portfolio.

I retired at 50 so they did OK for me.

Learn a bit about investments. Don't put all your eggs in one basket and be adventurous if you have the time.

[Ikincooper]

Learn a bit about investments. Don't put all your eggs in one basket and be adventurous if you have the time.

Great advice


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[sjedwardz]

Great advice


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I’ve used Monevatpr for most of my research. It’s a very good site which explains everything and also shows some example portfolios and funds


https://monevator.com/category/inves...ing-investing/

I’ve used this for my SSISA and SIPP

We set up ones for our children with world index tracker when they turned 18.

[Montello]

Some interesting comments here, the key is not to be lazy and do a bit of research. There is loads of info on YT and elsewhere.

Below is not advice just sharing my own observations. I'm not and IFA or financial professional. There maybe errors in my understanding.

I'd defiantly focus on keeping costs to a minimum, I see no value in expensive advice or platforms, there is so much research showing that few actually beat the market.

When comparing indexes make sure you know what you are buying. You can not just compare indexes without taking into account the impact of the dividends and the compounding effect they can have. For example the FTSE100 pays a better dividend than the S&P500.

When looking at a global tracker make sure you understand what global means.

The below shows the composition of the MSCI index family.

Many global trackers track the MSCI World Index; but note that does not include any emerging markets including China and India, doesn't seem very global when you look at it like that.

The MSCI World Index is dominated by the USA and the USA is dominated by the magnificent 7 (The “Magnificent 7” refers to the group of the U.S. tech giants, including Amazon, Meta, Microsoft, Nvidia, Google, Apple and Tesla). All have seen their market caps increase recently as Big Tech continues to dominate the U.S. stock market's landscape.)

When you look at it like that the global tracker doesn't seem as diversified as you may think ... (20% of your global tracker is in just 7 companies)





The below shows the world markets, you may wish to think about that when selecting which indexes you may wish to track. Note some big ones not in MSCI World Index.

Also note that the size of the market doesn't match the size of the national economy. America is *only* 28% of the global economy but the USA markets are a much bigger share.



Also note that when selecting its probably best to compare the accumulation version of the trackers to get the dividend effects rolled in.

Here are some examples below which map onto the MSCI graphic above. Note that different funds do better at different times, also note the global fund seems to track the S&P500 as that is its major constituent.

Also note that geographic diversification isn't as obvious as you may think For example 80% of the revenue of the FTSE100 is global so just because they are listed in the UK doesn't mean it is a domestic investment. Compare that with the S&P500 and 60% of their revenue is domestic. So in a way the FTSE100 is more of a global investment than the S&P500.

The FTSE100 is oil, drugs, banks, miners and consumer goods (all out of fashion) where as the S&P500 is tech dominated (34% !!)

Sometimes the the world needs more real stuff rather than another website ... so diversification isn't just about global spread but investing in a range of sectors.



Note these figures were done about 2 weeks ago using data from hl.co.uk

The above shows how different indexes have performed at different times recently. Point is they are different and so blended together give a good coverage. Just putting all your money in a global tracker maybe doesn't give you what you think it might ...

Note all the funds in the above list have fees ranging from 0.06% to 0.23% so they are all low cost funds.

As I say it's worth doing your homework to know exactly where your money is invested and if you think that mix is right for you. An MSCI World Index fund seems very focused on US/tech ... yes that has had a great run but who knows if that will continue???

[joe narvey]

Vanguards S&P500 has provided a good return last 18months. I moved from U.K. funds that had a bond element when Ms Truss did her mini budget and moved to U.K. equities.

I don’t manage it much except adjustments with big ticket events.

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

[Maris]

I’d run quickly in the opposite direction from SJP.

https://www.ft.com/content/e8f1b2ed-b1d7-4311-a8c9-fb784c1b344e

[Halitosis]

As I say it's worth doing your homework to know exactly where your money is invested and if you think that mix is right for you. An MSCI World Index fund seems very focused on US/tech ... yes that has had a great run but who knows if that will continue???

All salient point, and worth adding that what is held within a tracker automatically changes over time to reflect the moving markets. As a market or individual stock increases in relative size then the tracker fund will rebalance to hold more of it and slightly less of shrinking companies. 20 or 30 years ago Japanese stocks would have had a heavier weighting, alongside companies like Chrysler, Eastman Kodak, and Xerox. In another 20 years many think Indian stocks will surge, so would take a larger allocation of a global index. Hence the 'set and forget' comment - if happy with the construct of a tracker fund, then it will constantly rebalance to maintain its purpose (at low cost).

[Ikincooper]

Perhaps others might find the below video useful/insightful. Many of the points have been raised already…

https://youtu.be/uCydOfGCDDQ?si=fH-yp3C4VZLuAHy9


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[Montello]

In another 20 years many think Indian stocks will surge, so would take a larger allocation of a global index. Hence the 'set and forget' comment - if happy with the construct of a tracker fund, then it will constantly rebalance to maintain its purpose (at low cost).

If you think India will surge in the next 20 years and you hold a MSCI World Tracker you will miss out on any gain for the reasons explained above.

[greenandblack]

Below is not advice just sharing my own observations. I'm not and IFA or financial professional. There maybe errors in my understanding.

Thanks for taking the time to provide such detailed comments, it is really helpful to understand some of the nuances in what I thought should be quite straightforward trackers!

[Halitosis]

If you think India will surge in the next 20 years and you hold a MSCI World Tracker you will miss out on any gain for the reasons explained above.

I referenced global trackers and actually don’t hold any MSCI tracker.

Edit - I actually think your graphic shows that the MSCI ACWI does include India?

[Montello]

I referenced global trackers and actually don’t hold any MSCI tracker

What global tracker do you hold that includes India?

I think many buy a global tracker without really understanding what is under the bonnet. In some ways the titles are misleading.

[Montello]

Edit - I actually think your graphic shows that the MSCI ACWI does include India?

Indeed but that isn’t the MSCI World Index.

Do you hold a fund that tracks MSCI ACWI? It likely gives less than 2% India exposure.

[M1011]

Montello your comment on the composition of global trackers was very interesting.

[Halitosis]

Do you hold a fund that tracks MSCI ACWI? It likely gives less than 2% India exposure.

No I don’t (because my employer’s pension doesn’t include one in their selection) so I invest a percentage in an emerging markets fund.
I agree with your posts and merely suggested a global fund in response to the OP.

[Montello]

… so I invest a percentage in an emerging markets fund..

Ah, right … that’s what I do to …

I guess my point was that many “global” funds have zero emerging markets coverage which means no India or China, and others.

[Montello]

Montello your comment on the composition of global trackers was very interesting.

Glad you found it of interest, I do think the industry could do more to make investment easier.

[LukeBird]

Montello your comment on the composition of global trackers was very interesting.

Yeah agreed; something I need to come back to read and digest a bit more of I think.
I don’t do much investing myself, as having not long bought a house I’m not exactly flush with cash, but am trickling some money into a lifetime ISA, which I’ll add to more over the years.
I’ve picked a risky portfolio for the ISA, but interesting to see how else I could look into funds, so thanks for that.

[M1011]

Yeah agreed; something I need to come back to read and digest a bit more of I think.
I don’t do much investing myself, as having not long bought a house I’m not exactly flush with cash, but am trickling some money into a lifetime ISA, which I’ll add to more over the years.
I’ve picked a risky portfolio for the ISA, but interesting to see how else I could look into funds, so thanks for that.

Just a heads up, as you're a property owner already then if you're a higher rate tax payer you'd likely be better off putting your extra money into a pension than a LISA. More money in the pot that way.

[M1011]

Thanks to this thread, I've done a little digging on my own pension arrangement.

I've been pretty good lately when it comes to getting money into the pot, but I'll confess to not giving much thought to what's happening inside the pot. There is some optionality on funds available to me through my workplace pension, and of course the SIPP route.

As it stands, it's all in a Global Equity Fund, and in keeping with Montello's post it turns out it's quite USA centric. Returns seem decent, albeit below the 'benchmark' (although beyond me what the benchmark is set by), and fees seem OK at 0.11% (although some of the fund options are half that, others more than double). I'm not sure I'm any closer to a decision to change anything, but I'm at least a bit better informed now I've done some digging!

[Montello]

Well done for taking a look, that must be some sort of global active fund, that seems to be underperforming the index / benchmark.

[Halitosis]

That is a large gap in performance though I’d be surprised if it is actively managed at that fee rate. Does the fund fact sheet state the aim of the fund M1011? Perhaps it’s only to “loosely” track but with some freedom?

[Montello]

That is a large gap in performance though I’d be surprised if it is actively managed at that fee rate. Does the fund fact sheet state the aim of the fund M1011? Perhaps it’s only to “loosely” track but with some freedom?

With that bigger gap to the benchmark it can’t be trying to track the benchmark as tracking error is usually small. Not 6% different…

[ryanb741]

I have 60% of my SIPP in this fund, has done well for me and it's just a case of leaving it alone to do its thing.

[Montello]

I have 60% of my SIPP in this fund, has done well for me and it's just a case of leaving it alone to do its thing.

That fund is 58% in the USA. Top holdings the magnificent 7 so has benefitted from the tech boom in the last year.

[beechcustom]

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.

[vulcangascompany]

Low cost provider, cheap global equity tracker.

Vanguard & FTSE Global All Cap Index Fund is a combination that works for me.

[LukeBird]

Just a heads up, as you're a property owner already then if you're a higher rate tax payer you'd likely be better off putting your extra money into a pension than a LISA. More money in the pot that way.

Appreciate the heads up, but already paying into a DB scheme at work so this is just in addition to that.

[Halitosis]

With that bigger gap to the benchmark it can’t be trying to track the benchmark as tracking error is usually small. Not 6% different…

I see the sector allocation blurb talks of underlying funds, so M1011's investment is in a "fund of funds" - perhaps that precludes accurate tracking of any one particular index - it uses "Global Equity Benchmark" but references a note on page 4 so presumably that's the nearest/most appropriate index benchmark applicable. Although the gains lag the benchmark in good years, at least the losses in 2022 were less!

[mk2driver]

Most global equity funds are USA heavy but that’s because they mimic the stock market as a whole

This video does a great job at explaining it

https://youtu.be/98uYT3km5vk?si=dz5FzNjWUiLcfph_

[Montello]

Most global equity funds are USA heavy but that’s because they mimic the stock market as a whole

This video does a great job at explaining it

https://youtu.be/98uYT3km5vk?si=dz5FzNjWUiLcfph_

Aye, because 47% of global markets are the USA as shown in the above graphic, I think the more important thing to know is what markets are excluded from some “global” funds. E.g India and China.

[M1011]

That is a large gap in performance though I’d be surprised if it is actively managed at that fee rate. Does the fund fact sheet state the aim of the fund M1011? Perhaps it’s only to “loosely” track but with some freedom?

I see the sector allocation blurb talks of underlying funds, so M1011's investment is in a "fund of funds" - perhaps that precludes accurate tracking of any one particular index - it uses "Global Equity Benchmark" but references a note on page 4 so presumably that's the nearest/most appropriate index benchmark applicable. Although the gains lag the benchmark in good years, at least the losses in 2022 were less!

Below seems to be relevant info, but to be honest I'm not sure. Given the option I think I'd want to track as close as possible, but this seems the best of the pre-canned workplace pension options available to me.

Investment Objective
The Fund aims to provide long term growth.
The Fund mainly invests in company shares, also known as equities, from around the world. Investing mostly in equities means that
the Fund's value can change a lot in a short period of time. For this reason, it may not be a suitable choice if you'd like a more
stable fund or if you're close to retiring

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)

Appreciate the heads up, but already paying into a DB scheme at work so this is just in addition to that.

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.