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  1. #1

    SIPP for the risk adverse


    We are 47 and plan to retire at 55 (53 if the numbers go well). OH is in a DB NRD 63, expecting 26k if he stays to 55 and doesn’t take the pension early. Will also get 3x pension lump sum. Full years for SP but has been mostly contracted out. I have a deferred DB of 20k at NRD 60 and will get the full SP (got a forecast).

    So we have enough inflation protected guaranteed income for later in life, and are concentrating on building up funds to live on from 55 until the rest kick in. Currently I have 150k in DC / SIPP but OH doesn’t have any. Only a small amount in ISAs too.

    I am now maxing the 40k annual allowance and have a couple of years carry back to access. This is all at 40% tax relief and on top stops me losing the personal allowance which is why I have been doing this all in my name, especially while the 40% relief is still here - who knows for the future. But I would probably be at risk of the lifetime allowance if I do this all the time, and in the future need to be able to at least put 10% salary in as I then get 15% Ers

    I’m happy this is tax efficient for me, but we have 8 years where OH would not be earning while I would need to avoid withdrawing enough of my pot to pay 40% tax, so ideally would want to build a 100k SIPP in OHs name that he can take out tax free using his personal allowance. He is a 40% tax payer too.

    This is where we are not so smart, we have also been overpaying the mortgage a lot as OH is incredibly risk adverse and just wants to be debt free above all else. But I have had a small victory in that I can divert 500pm from the mortgage payments when one of the loans finishes shortly and start a SIPP for him. Then top it up more when the whole mortgage finishes in 2 years, plus ISAs which we could live off if we retire at 53 instead.

    Can anyone suggest any funds that would be acceptable to someone so risk adverse? He would quite happily leave it uninvested and just get the tax relief otherwise...I thought perhaps Vanguard 20% although I also read that bonds are risky too at the moment.

  2. #2
    I would be tempted to go for a portfolio of active funds that have a good track record of downside protection rather than trackers.

    An example might be something like M&G Optimal income for the bond exposure, perhaps Woodford for UK equities and Fundsmith for global equity.

  3. #3
    Investing should be undertaken with a long term view i.e. 10 years. Overpaying the mortgage provides guaranteed short term benefits. Personally I would prefer the security of being totally debt free. Than speculating on both the future direction of interest rates and markets in the coming months and years. Even if it meant delaying stopping work by a short period.

  4. #4
    What risks is he averse to?

    Remember its not just investment risk. There is shortfall risk and inflation risk as well as behaviour risk.

  5. #5
    Most stock market crashes recover within 120 days. The extreme ones that tend to come along once in a generation typically recover within 2 years. Look at your timescale. The money could be invested for 40 years. Not using investments but sticking with cash or equivalent could be extremely risky.

    Education and understanding sounds like it would be a good idea here. Making such important decisions based on poor information leads to bad outcomes. Your partner needs to understand ALL risks and not be focused on one at the expense of the others.

  6. #6
    Vls20 is safer than 100% bonds, as the volatility of the 20% equities cancels out some of the bond volatility. I have it for my wedding fund. It's bonds are also more gilty than some of the active ones I've seen (which go corporate to try to compensate for their fees), and global reduces the rates risk. I don't think the QE propping up bonds will be unravelled too quickly, or that rates would rise too fast


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