Investing and SIPP pensions

[fastgerman]

Hi All,

I'm fairly clueless on all of this so here goes...

I have £500 p/m available to be invested (from my Ltd company account) - I am in the process of setting up a HL SIPP with the aim of using a Wealth 50 portfolio:

https://www.hl.co.uk/funds/help-choosing-funds/wea...

I have a BTL property approx. 50/50 in deposit vs mortgage. Its a 2 bed flat in GU1 with average value for the area.

I have 2 old company pensions not worth any more than £20k combined.

In addition there are some small amounts in personal share dealing accounts, premium bonds, regular savings accounts etc.

Does anyone have any low maintenance ideas to add / change to the above?

My accountant and FA recommended researching EIS and VCT schemes however I don't want to do a Jimmy Carr and I want a peaceful life and sleep for my family without worrying about that kind of thing.

Other aims - I would like to leave my house and rental property to my kids mortgage free

On a bad day, I have 25 years of work left :-(

Many thanks in advance.

[Testaburger]

There will be far better informed folks along shortly to help, but as a stopgap, EIS/VCT investments won’t put you in the same camp as Jimmy Carr. That said, I understand these schemes to something to be explored once your annual/lifetime pension contribution allowance has been met.

With a pension (SIPP in your case), you will have your contributions topped up by the government, by the amount of tax you would have paid on that income. Effectively, you’re getting free money. An people say there’s no such thing as a free lunch!

If you hit the limit (40 grand a year total contribution), then EIS/VCT is worth looking at. By all accounts they tend to carry more risk, but with mitigations such as tax relief on losses.

I’d focus on a SIPP to take advantage of the government top-ups. Someone like JulianPH or Derek Chevallier can probably point you in the direction of asset classes to look at, but over your timeframe, a balanced global tracker seems to be conventional wisdom.

Edited to add - the above is based on the assumption that you are happy to have the money locked up until you’re 57 (on current regs). Otherwise, an ISA or other wrapper may be more suitable.

Edited by Testaburger on Wednesday 30th January 16:01

[85Carrera]

SIPP contributions made by a limited company will not be “topped up by the government” but can be offset against corporation tax.

[putonghua73]

fastgerman said:

Hi All,

I'm fairly clueless on all of this so here goes...

I have £500 p/m available to be invested (from my Ltd company account) - I am in the process of setting up a HL SIPP with the aim of using a Wealth 50 portfolio:

I have 2 old company pensions not worth any more than £20k combined.

In addition there are some small amounts in personal share dealing accounts, premium bonds, regular savings accounts etc.

Does anyone have any low maintenance ideas to add / change to the above?

Are the company pensions DB or DC (I assume DC)? Since you are setting up a SIPP, then transfer the two pots into your new SIPP, so you'll have one big pot and less fees (v.important), plus, you can add any amounts in your personal share dealing account. DA & Derek can advise on the type of investment vehicle - especially given that you'll have a mixture of lump-sum and drip-feeding.

Drip-feeding into a passive global index tracker is an easy SWAN [Sleep Well at Night] investment choice (with reinvested dividends), but lump-sum in current market is a different proposition (I switched £26k to a cash fund for now) - so hopefully DA, Derek et al can generate different potential options to explore for the lump-sum. Not keen on the charges for some of the Wealth 50 funds or narrow sectors - L&G International Tracker excl UK looks simplest with cheapest fees (although >50% exposure to US - part and parcel). That said, the tracking error against the underlying benchmark looks wide (c4% overall) - again, DA & Derek may be best to advise on this.

The only other thing is to keep an eye on the H&L loyalty bonus, how this works, any T&Cs, etc.

I would keep the premium bonds, and regular saving accounts (maybe move the funds into one cash ISA as a rainy day fund).

Given that you have another 25 years of investing, do not dismiss the returns that £20k or so can make just on market average returns with dividends reinvested.

Edited by putonghua73 on Wednesday 30th January 16:26

[Testaburger]

85Carrera said:

SIPP contributions made by a limited company will not be “topped up by the government” but can be offset against corporation tax.

Good catch, my apologies.

Is there any reason not to have it paid to the OP personally, to take advantage of what I mentioned (and NI)?

[85Carrera]

I think (but am not an expert) it is marginal whether it is better to have the limited company pay or to extract the cash, pay tax on it and then claim the tax back - although dividends are not relevant earnings so this may restrict how much tax relief can be claimed (assuming most of the money taken out of the company will be by way of dividends)

[Derek Chevalier]

fastgerman said:

My accountant and FA recommended

Assuming your accountant is authorized to give financial advice, what do you gain from paying an additional sum to a financial advisor? Especially as you don't seem to 100% trust him (otherwise why would you post on here)?

[JulianPH]

Testaburger said:

Someone like JulianPH or Derek Chevallier can probably point you in the direction of asset classes to look at, but over your timeframe, a balanced global tracker seems to be conventional wisdom.

Hi OP. Derek makes a very valid point above.

If you are happy to pick and monitor your own funds then the HL approach should cost you just over 1% a year.

As Testaburger says, I would have a look at a low cost global tracker or Vanguard LifeStrategy as an alternative. This would reduce costs with HL to 0.69% or lower.

If you would like the asset allocation managed for you and a named account manager then have a look at the Intelligent Money thread above (disclaimer - this is my company). This would cost 0.87% a year.

[fastgerman]

Thanks All,

My current plan is to put the originally mentioned sum into the SIPP account and do some more research on which funds / portfolios / individual shares.

The Buffett theory of buying shares in good companies and holding them forever makes sense given this is a pension pot.

I'll be honest, I won't trust a Financial Advisor / Accountant who pitches up in anything other than a Saab or Volvo or who is a family friend ;-). So when said person turns up in an M3 convertible and looks like he's fallen straight out of the Ned, it's a no deal from me.

[Btlguru]

fastgerman said:

Thanks All,

My current plan is to put the originally mentioned sum into the SIPP account and do some more research on which funds / portfolios / individual shares.

The Buffett theory of buying shares in good companies and holding them forever makes sense given this is a pension pot.

I'll be honest, I won't trust a Financial Advisor / Accountant who pitches up in anything other than a Saab or Volvo or who is a family friend ;-). So when said person turns up in an M3 convertible and looks like he's fallen straight out of the Ned, it's a no deal from me.

I’d be much more focussed on what they say and client recommendations, rather than what car they drive...

[fastgerman]

Ah but this is a pistonheads forum, not interactive investor or lse ;-)

[Derek Chevalier]

fastgerman said:

The Buffett theory of buying shares in good companies and holding them forever makes sense given this is a pension pot.
.

Does it?

[Btlguru]

fastgerman said:

Ah but this is a pistonheads forum, not interactive investor or lse ;-)

So why wouldn’t you trust a petrolhead advisor?

[Derek Chevalier]

fastgerman said:

I'll be honest, I won't trust a Financial Advisor / Accountant who pitches up in anything other than a Saab or Volvo or who is a family friend ;-). So when said person turns up in an M3 convertible and looks like he's fallen straight out of the Ned, it's a no deal from me.

It's an interesting observation you make about what car an adviser drives.

A friend of mine works for a well known firm and turned up in his DB9. The client commented on the car and my friend replied with "I'm happy to introduce you to an unsuccessful financial adviser". Took some plums, but seemed to work.

I think the ideal car is something along the lines of a 5 series, but I choose to turn up in a vulgar Civic Type R and park it round the corner

[fastgerman]

Btlguru said:

fastgerman said:

Ah but this is a pistonheads forum, not interactive investor or lse ;-)

So why wouldn’t you trust a petrolhead advisor?

In my opinion, a good financial advisor should be a family man/woman, who sees cars/boats/planes as a waste of money. Encourages bricks and mortar, tax efficient approaches and will list out explicitly what to do based on this research/charts/reasoning.

Out the 3 FA's I've had experience of (including my HSBC business person) they can't back up any of their suggestions. Interestingly, I setup an HSBC investdirect account some years ago (only Purple Bricks in there now) and took the suggestions of trying certain HSBC funds with virtual money. 5 years on and they are down...

The 1 person I would like to join (but can't afford to) is a family friend who is a fund manager. He does this for companies with several £m to spend however.

I like the HL interface as you can review portfolios and previous charts (if I so wish to go this way). I'm sure you can with others.

The most intelligent friend I have (Phd) has suggested a SIPP with AJ Bell and invest cash in Vanguard LifeStrategy 80. These are at £1.50 p/m + platform charges. He also feels he has wasted money on IFA's and porting pensions around. I'm going to have a read of How To Own The World also :-)

[Btlguru]

fastgerman said:

In my opinion, a good financial advisor should be a family man/woman, who sees cars/boats/planes as a waste of money. Encourages bricks and mortar, tax efficient approaches and will list out explicitly what to do based on this research/charts/reasoning.

Out the 3 FA's I've had experience of (including my HSBC business person) they can't back up any of their suggestions. Interestingly, I setup an HSBC investdirect account some years ago (only Purple Bricks in there now) and took the suggestions of trying certain HSBC funds with virtual money. 5 years on and they are down...

The 1 person I would like to join (but can't afford to) is a family friend who is a fund manager. He does this for companies with several £m to spend however.

I like the HL interface as you can review portfolios and previous charts (if I so wish to go this way). I'm sure you can with others.

The most intelligent friend I have (Phd) has suggested a SIPP with AJ Bell and invest cash in Vanguard LifeStrategy 80. These are at £1.50 p/m + platform charges. He also feels he has wasted money on IFA's and porting pensions around. I'm going to have a read of How To Own The World also :-)

Having a PhD doesn’t make you well placed to advise on investments!

[fastgerman]

Perhaps not, but it shows you’re good at researching

[Derek Chevalier]

fastgerman said:

a good financial advisor should be a family man/woman, who sees cars/boats/planes as a waste of money.

A good financial adviser is surely someone that talks the talk and walks the walk, someone who has their own financial plan and sticks to it?

fastgerman said:

Encourages bricks and mortar

Really?

fastgerman said:

charts

Surely not?

fastgerman said:

The 1 person I would like to join (but can't afford to) is a family friend who is a fund manager.

I thought we were discussing advisers. Do you think your family friend underperforms his benchmark like the vast majority of fund managers?

fastgerman said:

The most intelligent friend I have (Phd)

Is there a correlation between intelligence an a Phd. Furthermore, I've worked with some astonishingly intelligent people in the city that I wouldn't trust to boil an egg - devoid of any common sense.

fastgerman said:

has suggested a SIPP with AJ Bell and invest cash in Vanguard LifeStrategy 80

Does this align with your objectives?

fastgerman said:

He also feels he has wasted money on IFA's and porting pensions around

I tend to agree

fastgerman said:

I'm going to have a read of How To Own The World also :-)

Good

[Derek Chevalier]

Btlguru said:

fastgerman said:

In my opinion, a good financial advisor should be a family man/woman, who sees cars/boats/planes as a waste of money. Encourages bricks and mortar, tax efficient approaches and will list out explicitly what to do based on this research/charts/reasoning.

Out the 3 FA's I've had experience of (including my HSBC business person) they can't back up any of their suggestions. Interestingly, I setup an HSBC investdirect account some years ago (only Purple Bricks in there now) and took the suggestions of trying certain HSBC funds with virtual money. 5 years on and they are down...

The 1 person I would like to join (but can't afford to) is a family friend who is a fund manager. He does this for companies with several £m to spend however.

I like the HL interface as you can review portfolios and previous charts (if I so wish to go this way). I'm sure you can with others.

The most intelligent friend I have (Phd) has suggested a SIPP with AJ Bell and invest cash in Vanguard LifeStrategy 80. These are at £1.50 p/m + platform charges. He also feels he has wasted money on IFA's and porting pensions around. I'm going to have a read of How To Own The World also :-)

Having a PhD doesn’t make you well placed to advise on investments!

You beat me to it

[fastgerman]

Rather than us bickering, can one of the more qualifies members of this forum e.g. Derek, give me some suggestions please?

I have given as much detail as I did to IFA's in my first post excluding name, DOB, address and my bank details :-)

Thanks