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SIPP strategy 2013
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Confused Dad
Posted: 07 February 2013 21:51:36(UTC)
#1

Joined: 17/03/2011(UTC)
Posts: 40
Hello all,

Looking for some direction on setting up a SIPP. I have about £25k in a black rock fund and I am thinking of setting up a SIPP for the first time.

My questions are:-

Do I use H&L where I keep all my other dealings or another provider such as Cavendish who are apparently cheaper?

Secondly, this money is part of my pension planning so I don't need it for 20yrs but how on earth do you select funds for the money to go into? i was thinking of 3-4 funds but worth sort of balance and do you go for income or accumulation funds?

Thirdly, I am told investment trusts may be a good thing to also consider but I am unclear on the difference / benefits versus funds?

All thoughts welcomed on rather a complex subject.

Regards
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TJL
Posted: 08 February 2013 09:13:49(UTC)
#2

Joined: 14/03/2011(UTC)
Posts: 1,630

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I would say take your time, because once you have chosen a platform, changing will be messy and will probably cost you money.
It is undoubtedly more convenient to have all your investments in one place, but you don't have to and from their comments, some people who contribute to this forum apparently have different investments in different places.
Go to the websites of the main platforms and make a point of getting your head around their charges and how they compare - draw up a table if it helps. HL's service is second to none, but as you say, they may not be the cheapest.
Which investments? - no-one can predict the future but if you stick with rated and regarded managers who have a track record you stand as much chance as anyone of doing okay.
You can chop and change your investments as appropriate, so once you have made your choice you are not stuck with it.
The balance is an endlessly debatable issue; a global fund/trust would give you diversification, but what about Asia and emerging markets and not forgetting Europe and the UK.
Income re-invested does much the same as accumulation, but accumulation is obviously more about growth, in theory at least.
It took me ages to get my head around investment trusts, I don't know why because once you grasp the idea it is not complicated. They generally have lower charges and I think it is true to say they generally outperform funds over the long term - it would be worth reading up on them. You buy shares in them so there is a dealing cost (typically £11 - £12) and you have to pay stamp duty.
Hope this helps, happy to enlarge (but there's no guarantee I have a clue what I'm talking about).
Regards
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3 users thanked TJL for this post.
Guest on 08/02/2013(UTC), Confused Dad on 09/02/2013(UTC), Stephen Garsed on 11/02/2013(UTC)
P L
Posted: 08 February 2013 11:06:08(UTC)
#3

Joined: 10/08/2008(UTC)
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Firstly I don't think Cavendish SIPP is cheapest given I believe they use/sell the Fidelity Fundsnetwork SIPP which has an upfront and annual plans fees (note this is not to be confused with the Fideility Personal Pension Plan (SIPP) (managed byStandard life) which is a lower cost execution-only SIPP akin to.the H-L and BestInvest Select SIPPs which have no plan management fees). These lower cost SIPPs don't allow dealing in the more exotic investments so be careful as there are SIPPs and SIPPs.

BestInvest SIPP has an advantage if you plan to use index funds (not vanguard however) such as offered by HSBC, Fidelity & L&G. H_L will charge £1 or 2 / month for each fund to hold these. The BestInvest dealing fee for shares/ITs are cheaper if you hold over 50K. However H-L now offers an AMC rebate which I believe is not dependent on how much you hold, where as for BI you need to have 50K+. Fidelity PPP doesn't rebate at all as far as I;m aware.

IT's are generally cheaper in the long run as rather than having says a 1.5% AMC they may be only have 1% or less. If BI/H-L rebate a % say 0.25% you are saving a small amount each year. Also due to their closed nature the manager is not forced to sell holding when people sell which potentially gives them an advantage as they can afford to take long term positions.

So you potentially save £60 AMC fee per year on 25K. On the down side is the upfront dealing fee say £7.50 and again each time you switch investments (sell/buy). Where as UTs/OEIC are currently free to buy/switch. This MAY BE doesn't look too bad until you realise both H-L and BI charge to hold shares/IT's BI - fixed £120/year, H_L 0.5% ( £125 with max £200). So ok if you have a very large portfolio but not for 25K.

SippDeal, Alliance and Interactive Investor I think have similar charging structures. Some like interactive investor rebate the full 0.5% but charge £120/year.

The only way to really compare them is to define you investment style and estimate what your pattern of purchases and switches will be as it will make a significant different to which is the most cost effective, The place to start is to make the assumption that at the very least 0.5% of your fund value is being taken each year for advice/service/platform etc ie the 0.50% of the 1.50% AMC (potentially rising up to 0.75% if you assume funds generally cost 0.75% to run and you might be able to avoid/minimise the pltform charge of 0.25%).

So £120 to £190 / year. So anyone offering to return 100% of the AMC ie the entire 0.50% must be cheaper than this when all the other costs are added in including dealing. Obviously the sums change as the fund values rise since the % charging structure becomes a significant cost driver which is why BI and H-L are generally best for low value but become increasing less so as it rises. In an ideal world you simple switch provider but they get you again by the £25/fund transfer fee - except you could always potentially do a switch into a single fund/cash first
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1 user thanked P L for this post.
RBlezz on 08/02/2013(UTC)
chazza
Posted: 08 February 2013 16:50:16(UTC)
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Sippdeal make no annual charge and their dealing rates are lower than HL (£9.95 max.). I was in a similar situation to you 2 years ago, and have used Sippdeal to buy Investment Trusts. Their dealing platform is not quite so slick or responsive as HL's, but their admin has been excellent. In your position, I would choose 4 or 5 ITs to start with. Possibly lower charges apart, the reason ITs generally do better than similar OIECS / unit trust funds is that they can borrow (gear) to enhance the effects of rising prices in good times and, as closed funds, don't have to expand just because they become popular with investors (popularity just raises the market price and narrows the discount / drives the price to a premium over net asset values).
My strategy has been to gain international exposure as a hedge against the fact that the greater part of my retirement income will be in the form of pensions paid in GBP, but I am not sure I wish to be confined to this island is my dotage. So I have bought (and sometimes sold) ITs such as SST (Scottish Oriental), Aberdeen New Thai (ANW), AAS (Aberdeen Asian Smaller), ABAA (Aberdeen All Asia), JEO (Jupiter European), UEM (Utilico Emerging Markets), CYN (City Natural Resources). HANA (Hansa). My recent buys have been HANA and CYN on grounds that both are likely to benefit hugely from a revival in commodity prices (which I think is imminent), with HANA sitting on a 25% discount despite holding a high quality portfolio.
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Kenpen2 on 11/02/2013(UTC), Guest on 11/02/2013(UTC)
P L
Posted: 08 February 2013 17:39:09(UTC)
#5

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Chazza is quite right - my mistake. Had misread the SippDeal custody charge as applying to shares as well as funds, which is what H-L and BestInvest do.

In which case I'd have to agree with him wrt IT's unless you're planning on switching in/out quite often.

5 IT's at a total initial cost of £50 with an ongoing cost of say £20/year to cover one switch looks pretty good against £120 year on year elsewhere they'll take from the fund AMC.

For reference if you decide to invest outside of a SIPP X-O are cheap at £5.95, but unfortunately don't do auto reinvestment.
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John Glover
Posted: 08 February 2013 17:49:09(UTC)
#6

Joined: 15/12/2011(UTC)
Posts: 2
Make sure your chosen SIPP provider can cover the increased capital adequacy requirements proposed by the FSA.

It is expected that around 30% of SIPP providers will not be able to meet the new requirements.

Basing your decision solely on price may have future ramifications.

Providers may be cheap but will they still be solvent when these new requirements come into force?
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brian bennis
Posted: 10 February 2013 11:28:23(UTC)
#7

Joined: 23/10/2012(UTC)
Posts: 9
As John Glover says...

Quote:
Basing your decision solely on price may have future ramifications.


There's more to SIPPs than stockmarket investments, which so far has been the only area discussed. With the rise in popularity of crowdfunding, you could consider lending your SIPP money. Currently, Thincats allows SIPP loans on its platform, and with an average return of 10%+ with almost no volatility (although there is a default risk), it's worth considering this for your SIPP.

With SIPPs allowing property and other investments too, it's well worth a wider review before you plump for a 'stockmarket only' SIPP operator, like most of those listed above.
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COYS54
Posted: 10 February 2013 12:04:58(UTC)
#8

Joined: 10/02/2013(UTC)
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Regarding fund choice, if it is funds that you eventually decide to invest in, there is a service available that is useful if you have a large-ish SIPP invested, and the time to manage it, It costs a monthly £25, but provides a quick summary of relative performance of funds broken down by fund sectors. I have used it for 15 months and reckon it has paid for itself many times over.
It allows you to view the sectors against each other for the past 4, 12 and 26 weeks, and within each sector, to see the top performing funds. Once you decide to invest in a sector, it makes sense to choose one of the top performing funds.
The service is not advisory, just a clean way to present data. It is called saltydoginvestor.com. Have look if you are interested, but for a small level of holdings it will not suit. It adds value when you hold 15+ funds in my view. One bonus feature they have is that they have two of their own portfolios. One is their "tugboat" (all nautical terms used) which acts as a cautious (in my view) benchmark against which you can track your own SIPP performance, and the other is the "speedboat", which invests in ETFs. They use H-L for the latter, not sure who they invest in for the former. Therefore their performance is actual, including charges, which helps and is real life.
I have not found an equivalent service, which helps me decide where to switch funds into when I want to sell, without having to wade through thousands of potentials. The other helpful guide is that they identiy funds with a bid/offer s[read, which is worth knowing if you do not intend to stick with the investment long term.
Good luck!
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john edwards on 10/02/2013(UTC), ebkent99 on 11/02/2013(UTC)
SKYSHIP
Posted: 10 February 2013 12:14:05(UTC)
#9

Joined: 06/11/2012(UTC)
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Brian - go back to the first post and you'll see Confused Dad talks of just £25k to open the SIPP.

No way he should consider off-piste investments with such a small initial pot.

Confused Dad - The first and most important decision is which provider to use. Using Sippdeal is the first absolute. Click onto the link then scroll down and you'll see you can compare everything very easily. Sippdeal is the original online SIPP provider - still the best & still the cheapest.

http://www.sippdeal.co.uk

As to where to invest your pot - the closed-end trust sector is perfect for those preferring to delegate a degree of management to the expertise of a third party. However don't BUY & FORGET. Keep a track of your holdings; and regularly compare performance. Make decisions on Market sectors, with special consideration of currency and country.

Don't think that ITs are just portfolios of FTSE100 companies - if you want that - BUY a tracker!

Haven't got the time to say much further other than:

1 - Don't over-diversify - to do so guarantees an average performance

2 - Do buy a property trust - at the moment I would recommend PCTN

3 - Do buy a Private Equity trust - at the moment I would recommend HVPE

Finally, you will find an active investment trust thread on The Motley Fool website ("TMF") . TMF has many wafflers, more than on other sites ; but mercifully a few experts do post - you will learn to differentiate...

http://boards.fool.co.uk...-unit-trusts-50097.aspx

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3 users thanked SKYSHIP for this post.
Confused Dad on 10/02/2013(UTC), jeffian on 10/02/2013(UTC), Stephen Garsed on 11/02/2013(UTC)
brian bennis
Posted: 10 February 2013 12:22:43(UTC)
#10

Joined: 23/10/2012(UTC)
Posts: 9
Quote:
Skyship - No way he should consider off-piste investments with such a small initial pot.


I agree. But it's not clear whether £25k is just an opening sum, with much more available to follow in due course. It's worth Confused Dad reviewing the full range of opportunities that SIPPs provide, along with the charging structures of the operators, even if it serves to eliminate them from his thinking.
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