Well, I wouldn't go for a SH (too inflexible). I probably would not go for a
SIPP either because I've come to the conclusion that trying to self-invest
is less of a money-maker than using professionally managed funds (and I
don't mean Managed Funds - if you see what I mean).
Also being lazy I would prefer to put my money into something and tend to
leave it until there's a good reason to switch. I have a horrible suspicion
that many people who invest in SIPPs are deluding themselves thinking they
are doing better than fund managers. They may well be, if you compare them
with average fund managers. But you need to look at the top 10% or so, and
these can be quite consistent.
Err, no. " professionally managed funds" as opposed to "Managed
If I go for a Sipp then I guess I would run it in the same way as my
investment portfolio below. This consists of a group of funds that
hopefully give me a reasonable geographical spread.
5%ABERDEEN ASIA PACIFIC A
8%ARTEMIS UK SPECIAL SITUATIONS
11%AXA FRAMLINGTON UK SELECT OPPORTUNITIES
6%FIDELITY EUROPEAN OPPORTUNITIES
7%FIDELITY SPECIAL SITUATIONS
5%GARTMORE EUROPEAN SELECTED OPPORTUNITIES A
6%INVESCO PERPETUAL CORPORATE BOND
5%JPM EUROPE SMALLER COMPANIES
8%JPM NATURAL RESOURCES A
5%JUPITER EMERGING EUROPEAN OPPORTUNITIES
4%LEGG MASON US EQUITY A
5%NEW STAR EXTRA HIGH YIELD
5%OLD MUTUAL UK SELECT MID CAP A
7%RENSBURG UK EQUITY INCOME
5%TEMPLETON GLOBAL EMERGING MARKETS A
These are all managed funds and by keeping an eye on them I
occasionally weed out the under-performing ones. I'm due a spring
I thought I'd use similar principles for the Sipp. Start out with 3
or 4 managed funds and add other funds over the years. Unless someone
in here tells me otherwise.
I wouldn't want individual shares and try to beat the market if
that's what you mean.
SIPPs aren't always expensive, have a look at Hargreaves Landsdown or
H-L don't charge anything for most managed funds (unit trusts, OEICs
etc) since they get the renewal commission, they also normally rebate
all or nearly all the initial charge.
hmm that is food for thought.
Not sure I wanted any further options though :-)
On the face of it a free Sipp may be cheaper than a typical 1% p/a
management fee by a stakeholder.
As for sippdeal, what happens if that company ceases to trade?
they're hardly a household name - presumably the funds she invested in
would still exist in her name and could be transferred into another
Just to add some more points -
Don't become fixated on the type of product - it's the fact that your
saving that's important. The tax benefits of pensions and ISAs are
similar - money into pensions is tax free, money out is taxable
(unless below your tax free allowance). Money into ISAs is taxed
(unless below your tax free allowance), money out is tax free.
Pensions restrict when and how much you can take out, ISAs don't.
Pensions are not included in bankruptcy proceedings or means tested
benefit calculations, ISAs are.
Is her existing pension going to use up her tax free personal
I think you've fallen for FUD as regards SIPPS.
See Sippdeal and Alliance Trust in addition to HL already mentioned.
If employers willing to contribute 6% to a personal pension, then
that's quite rare I believe. Normally they limit it to group personal
The Pensions Advisory Service (TPAS) http://www.pensionsadvisoryservice.org.uk/
also the TMF boards -
Fair enough but an ISA won't make use of the 6% contribution match
from her employers. And a pension is a better discipline, she can't
get her hands on it so readily should the temptation arise.
No, her previous pension is frozen now until she retires.
Will do - it's just that I've *heard* of HL, not so much of AT and
nowt about Sippdeal. Do you know off the top of your head which is the
biggest company of the three? What happens to her sipp if Sippdeal go
under - her independent funds will still be held by the parent company
(e.g. Gartmore) I guess.
Hmmm. She says both her employers are willing to do that as they don't
offer a plan themselves.
Yes - I have rung them already.
Well, maybe but the TPAS said a stakeholder seems a better prospect.
Maybe I rang them with that mindset. I might try another call.
Yup - I'll have a look through. Thanks for the reply.
True and true again if she's not disciplined <g> !
I meant her income tax nil rate band upon drawing the pensions, but it
matters not since you've confirmed the 6% employer contribution to a
pension, which makes the alternative of ISAs a non starter.
They're what I'd call medium size with £4bn under administration -
I'd guess AT the market cap. is £2.3bn, but that won't include assets
Correct (and a good question!). I dealt with that here -
Excellent news ! Perhaps times have changed and I'm a little out of
date. It makes perfect sense of course, I can only think that
employers I came across wanted to play the controlling, paternalistic
role and try to keep what control they could of assets.
I'd say that they're wrong. It's simple enough to do the sums yourself
http://sippdeal.co.uk/charges.aspx (for instance)
fwiw I've been using Sippdeal since just after they started and am
almost completely content. My only minor bones of contention, which
are by no means limited to Sippdeal, are cash balances that pay 1%
below base - I'd prefer 1% below LIBOR, but maybe I'm being
unrealistic, and equity dealing commission which is above 1% for
amounts in the >£2,000 to <£4,000 range and the fact that they keep
the annual renewal commission on Unit Trust/OEICS (not that I use them
- I'd avoid it by using Exchange Traded Funds ETF)). I'd say it's a
close run thing with AT and having had a PEP with AT I have a lot of
respect for them.
Personally, at the moment, I feel that the odds of underperforming
risk free investments is greater than that of outperforming and so I
wouldn't invest in equities or property. I'll review when I think that
the full effect of the rise in lending rates / lack of lending are
apparent to business and the man on the street, it always takes 12-18
months for the full effects of such changes to become widely felt.
I'd go Sippdeal or AT and dump the lot in a cash fund, wait until
pessamism abounds and invest in one of the following in order of
personal preference -
High yield, buy and hold strategy
High yield, change each year
iShares FTSE UK Dividend Plus
Invesco Perpetual Income
Invesco Perpetual High Income
Barclays Global Investors (BGI) iShares FTSE 100 Exchange Traded Fund
For the fundamentals of investing, see -
What Has Worked In Investing -
and for glorious simplicity, see -
The High Dividend Yield Return Advantage: An Examination of Empirical
Data Associating Investment in High Dividend Yield Securities with
Attractive Returns Over Long Measurement Periods -
from the long running and respected value investors Tweedy Browne (one
of about 5 people/organisations that offers insight imo).
On Fri, 30 May 2008 03:52:34 -0700 (PDT), Daytona
She wouldn't spend it on new shoes but I'd like to keep it out of
harm's way if we move house for example.
Any thoughts on Hargreaves Lansdown as a company?
Ah, right - thanks.
So, the underlying funds are still owned by my wife and she loses
nothing. Unless money is in transit or she has just paid a lump sum to
the Sipp and it hasn't been invested yet.
I have just posted my initial post on the TMF forums. Didn't realise
you guys were regulars on there too. Don't blackball me as a
I *think* I understand :-)
Brilliant reply - thanks for taking the time.
I'll have a look throught these this evening. I'm supposed to be
painting the kitchen....
On the face of it though, there's a lot of high income funds there. I
thought the idea was to build up funds regardless of their
income/growth flavour and then buy an annuity at the end, with maybe
25% lump sum?
If so why recommend High Income funds - I thought they were moreso
vehicles for providing income for people that want to skim and live
off their investments. If you're buying an annuity you's surely just
want the best performing funds regardless of their growth or income
High income funds are funds where the manager chooses shares in companies
that tend to pay higher than average dividends. These dividends can be
reinvested into the funds to buy extra units if the holder does not want the
income (and this will be the case if the funds are within a pension). But
the income is not fantastically higher than would be the case with capital
There is a body of opinion (to which I subscribe) that high income funds
tend to do better over the years than capital growth funds if you let the
income accumulate within the fund Invesco Perpetual High Income, for
example). This is partly because the shares within the fund tend to be the
shares of smaller companies, which have historically been a good place to
But it could be a restrictive option in terms of having the money
available to pass on as inheritance.
I've not really used them - I bought and sold some warrants 10 years
ago but that's hardly relevent - I would have recommended them
alongside SD & AT had Andy Pandy not already mentioned them. I'm a
little prejudiced against them because of their percentage based fees
ie the Unit Trust / OEIC renewal fee - I prefer cost plus based fees.
Money at -
Administrator - Sippdeal, AT, HL etc = FSCS investment sub scheme
Fund manager = FSCS investment sub scheme compensation £48,000
Bank = FSCS deposit sub scheme compensation £35,000
I am, I don't know how many others are. This and TMF are imo the best
places for financial advice in the UK. Crossposting is OK - finance is
serious stuff so the more views the better. I would, however, have
crossposted links on both as a courtesy so that people don't go over
old ground. Google Groups keeps a comprehensive usenet archive which
facilitates linking; this thread is -
No worries - keep asking/internet searching until you do or you wear
us out and no-one answers <g> !
For some reason, historically, companies paying relatively high
dividends, and hence the income funds which invest in them, have
outperformed the rest in terms of total return (capital gain plus
income). See the research papers. So it's an investment strategy known
as high yield. If you don't need the income you simply reinvest it.
In theory, it shouldn't be that way because money kept with the
company and reinvested (and hence untaxed) should lead to a greater
return than money which is taxed and distributed to shareholders. I
think I've explained it correctly, but others will no doubt dive in if
As for annuities, I wouldn't. Escalating annuities are a waste of
space see -
I see annuities as for people who are desperate for the security of an
income if you live to 105. But the state pension and in your wifes
case her teachers pension handles that, so that any further investment
in a restrictive environment aint great. I subscribe to the 'pension
plundering' view - as early as possible, take the maximum tax free
cash and use unsecured pension (aka income drawdown) to extract 120%
of the equivelent level annuity amount and reinvest the excess in a
more benign environment eg ISAs or using a plain non ISA account.
Oh dear. 55 years until break-even?
Didn't that ring alarm bells that your calcs were wrong?
You have year 1 'level' annuity payment of
7,030 used as 4,267 'income' (equivalent to
'indexed' annuity) plus 2,763 invested. OK so far.
Next year the 'level' annuity payment is still 7,030, but the
'indexed' annuity grows to 4,437, so 2,593 is invested,
or 2,493 in today's money. Still OK so far. However...
2,763 invested from first year grows to 2,907 in second
year, plus 2,593 invested from second year is 5,500
which is 5,288 in today's money. NOT 5,400 !!!
[Looks like you forgot to convert
the 2,907 back to today's money...]
The website doesn't seem to allow you to download
the spreadsheet without registering, so I haven't.
Can you tell us what the correct break-even
duration is, when the above error is corrected?
5.2% is the real investment return, inflation is 4%, giving 9.2%
nominal investment return.
2,763 invested from first year grows to 3,017 in second year (@ 4%
+5.2%), plus 2,593 invested from second year is 5,610.
2,763 invested from first year grows to 2,907 in second year (@ 5.2%),
plus 2,493 invested from second year is 5,400.
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