Author Topic: Should I move to Vanguard UK ?  (Read 2942 times)

jade

  • Stubble
  • **
  • Posts: 183
Should I move to Vanguard UK ?
« on: March 07, 2018, 05:53:45 AM »
hi all,

I have a S & S ISA (Vanguard Life Strategy 60) with Charles Stanley Direct but have plans to move to Vanguard UK directly now that this is an option for UK investors as it seems like it will be worth it with the lower fees. I just wanted to check that this is still the case in the event I missed something since I decided?

Platform fee Vanguard UK: 0.15%
Platform fee CSD: 0.25%

TER/OCF: 0.22% for both ?

many thanks!

aoedae

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Re: Should I move to Vanguard UK ?
« Reply #1 on: March 07, 2018, 07:09:14 AM »
Snap! I'm also with CSD and thinking about switching to Vanguard this year.
The key thing missing from your summary is dealing fees, transfer fees, exit fees - i.e. all the hidden add-ons.

I use monevator.com as a source for most of my investment information. Key article links are:


Two further points to consider:
  • With Vanguard you can only hold Vanguard funds, so if you want to use other providers at some point it might be worth keeping a CSD S&S ISA open.
  • It's also putting 'all your eggs in one basket' with platform providers, but that's what you have already with just CSD.

Personally, my current plan is to keep my existing investments with CSD for the coming year (around £7k), and open a new S&S ISA in the next tax year with Vanguard and push £16k into it next year (my limit, on top of LISA subscriptions).
« Last Edit: March 07, 2018, 07:13:40 AM by aoedae »

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #2 on: March 07, 2018, 07:46:36 AM »
thanks aoedae - that's really helpful.

I don't have any dealing fees with CSD as VLS60 is a fund (if I've got the terminology right?) so it looks like for me there's the £10 exit fee with CSD to factor in, which is still worth it I think as i will be reducing my overall fees as my fund grows.

I think we're happy with just VLS60 and one platform for now, but worth thinking on before we take the leap - thank you.

Your plan sounds good and it keeps that diversity you mention.

Good luck! 
« Last Edit: March 07, 2018, 07:50:00 AM by jade »

ruffles

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: Should I move to Vanguard UK ?
« Reply #3 on: March 08, 2018, 05:10:24 AM »
First post from a long-time lurker here. I too have had the same dilemma, except my S&S ISA is with HL. I like aoedae's idea of leaving it where it is, and then opening a new one at Vanguard for the 2018-19 tax year.

When you think about it, not knowing exactly where to put your money is one of the better problems to have!

TartanTallulah

  • Bristles
  • ***
  • Posts: 459
  • Location: The Middle of Scenic Nowhere
Re: Should I move to Vanguard UK ?
« Reply #4 on: March 08, 2018, 05:36:10 AM »
First post from a long-time lurker here. I too have had the same dilemma, except my S&S ISA is with HL. I like aoedae's idea of leaving it where it is, and then opening a new one at Vanguard for the 2018-19 tax year.

When you think about it, not knowing exactly where to put your money is one of the better problems to have!

That's my plan too, with a view to maybe moving other investments to Vanguard at a later stage if their initial promise is maintained.



Slow road to freedom

  • 5 O'Clock Shadow
  • *
  • Posts: 70
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #5 on: March 09, 2018, 03:13:42 PM »

That's my plan too, with a view to maybe moving other investments to Vanguard at a later stage if their initial promise is maintained.

Ditto. Current stash with HL, plan to open up direct with Vanguard on 6 April.
I really want to do things other than work... :-)

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #6 on: March 12, 2018, 04:29:57 AM »
First post from a long-time lurker here. I too have had the same dilemma, except my S&S ISA is with HL. I like aoedae's idea of leaving it where it is, and then opening a new one at Vanguard for the 2018-19 tax year.

When you think about it, not knowing exactly where to put your money is one of the better problems to have!

Yes, not a bad problem at all ruffles! :)

We are now wondering if just staying on one platform is a good idea too... We're newbie, simple investors building up a stache in VLS60 (currently £30k+) after receiving some advice here. So cheapness wise and fund wise Vanguard would be ok, and I understand the VLS60 itself is diversified but I wonder if leaving the £30k in CSD and then starting another ISA in Vanguard just to diversify across platforms might be more prudent. And as TartanTallulah & Slow road to freedom said, maybe move over in time?

« Last Edit: March 12, 2018, 04:34:04 AM by jade »

PropJoe

  • 5 O'Clock Shadow
  • *
  • Posts: 29
Re: Should I move to Vanguard UK ?
« Reply #7 on: March 12, 2018, 06:16:57 AM »
I also plan to move my HL ISA to VG when the new tax year opens.

A couple of things I found during research:

HL charge £25 per fund exit fee. I have 8 funds so I will consolidate them into 1 VG fund, e.g. Life Strategy, and then once they have been transferred to VG, I can split them out into 8 funds again at no extra cost. HL will only screw me out of £25 instead of £200.

VG allow you to do a Full or Partial transfer.
Partial means you can leave behind any non-vanguard funds or stocks. I'll be doing this since I hold an old crappy stock which is still in the red, want to hold it rather than realising the losses.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #8 on: March 12, 2018, 06:53:17 AM »
Good idea to consolidate and then split!

Yeh, I need to decide whether to go partial or full transfer. I can see the fees increasing as the fund grows in CSD which I would like to get down but I can also see diversifying the platforms could have benefit.

never give up

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #9 on: March 12, 2018, 11:33:56 AM »
I don't know how much news would be made public on this but I wonder how many people (not necessarily just on this site) had already opened a S&S ISA last year prior to VG announcing it was possible to invest with them directly. I have a feeling there could be a lot of transferring out from various platforms into VG after April 6th. I'm one of them.

As PropJoe implies its certainly worth checking the exit fees with any existing provider as the example demonstrates, there is a considerable saving to be had in some cases.

From my point of view the less paperwork and companies I have to deal with the better. So I will do a full transfer. I don't have much invested so I don't think its worth worrying about platform risk or diversification of that kind until the balance is well into the 100k's. For anyone fully bought into the buy and hold index approach, the fact they only have their own funds is not a negative at all.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #10 on: March 13, 2018, 03:48:54 AM »
I don't know how much news would be made public on this but I wonder how many people (not necessarily just on this site) had already opened a S&S ISA last year prior to VG announcing it was possible to invest with them directly. I have a feeling there could be a lot of transferring out from various platforms into VG after April 6th. I'm one of them.

As PropJoe implies its certainly worth checking the exit fees with any existing provider as the example demonstrates, there is a considerable saving to be had in some cases.

From my point of view the less paperwork and companies I have to deal with the better. So I will do a full transfer. I don't have much invested so I don't think its worth worrying about platform risk or diversification of that kind until the balance is well into the 100k's. For anyone fully bought into the buy and hold index approach, the fact they only have their own funds is not a negative at all.

thanks never give up.

I am now wondering about whether I should be diversifying platforms at my stage (£30k+) and leaving that money in CSD and then opening another ISA in Vanguard and building that up next. Though I too haven't yet got a balance in the 100k's, as it seems there is a £50k protection for ISA's with the FSCS, I am wondering if that might be prudent so spread out the money. It's weighing it up the risk and also increased fees in my case at CDS.

I like less paperwork too, tho thinking in time maybe an ISA in my husbands and my name over two platforms will give us a spread of protection.

My exit fee at CSD is only £10 so that's ok.

never give up

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #11 on: March 13, 2018, 04:15:20 AM »
Yes this thread made me look that up to. £50k isnít as high as I thought. I wonder if that applies to company pensions too. Quite a scary thought. I now think that I wonít transfer. Having gone to the effort of having an account I may as well just keep it and open a new one with VG in the new tax year. I know these are very large organisations that have little chance of failing but it seems prudent to me to spread investments about a bit.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #12 on: March 13, 2018, 04:30:30 AM »
Yes this thread made me look that up to. £50k isnít as high as I thought. I wonder if that applies to company pensions too. Quite a scary thought. I now think that I wonít transfer. Having gone to the effort of having an account I may as well just keep it and open a new one with VG in the new tax year. I know these are very large organisations that have little chance of failing but it seems prudent to me to spread investments about a bit.

mm, that's what we're thinking too now - prudence is never a bad thing I reckon.

cerat0n1a

  • Handlebar Stache
  • *****
  • Posts: 1075
  • Location: England
Re: Should I move to Vanguard UK ?
« Reply #13 on: March 13, 2018, 05:54:17 AM »
I know these are very large organisations that have little chance of failing but it seems prudent to me to spread investments about a bit.

I see the reason to diversify being not so much that the organisation may fail in the financial sense, but to mitigate against IT issues, fraud etc etc. Agree that it's not worth worrying about until you're well into six figures, particularly if it means extra costs.

Does anybody know when Vanguard plan to offer a SIPP? I think I read they will do so in 2018, but have not seen any coverage.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #14 on: March 13, 2018, 05:57:46 AM »
I know these are very large organisations that have little chance of failing but it seems prudent to me to spread investments about a bit.

I see the reason to diversify being not so much that the organisation may fail in the financial sense, but to mitigate against IT issues, fraud etc etc. Agree that it's not worth worrying about until you're well into six figures, particularly if it means extra costs.

Does anybody know when Vanguard plan to offer a SIPP? I think I read they will do so in 2018, but have not seen any coverage.

Thanks cerat0n1a - so possibly over cautious to go up to £50 k only on each platform?
I heard about Vanguard saying they'll offer a SIPP too but nothing since then either.


aoedae

  • 5 O'Clock Shadow
  • *
  • Posts: 50
Re: Should I move to Vanguard UK ?
« Reply #15 on: March 13, 2018, 05:59:21 AM »
Yes this thread made me look that up to. £50k isnít as high as I thought. I wonder if that applies to company pensions too. Quite a scary thought. I now think that I wonít transfer. Having gone to the effort of having an account I may as well just keep it and open a new one with VG in the new tax year. I know these are very large organisations that have little chance of failing but it seems prudent to me to spread investments about a bit.

I mean, the thing with platforms is that the 50k should cover what happens if the platform goes bust - AND you have the extra protection that you should just be accessing the S&S through the platform, because in my understanding you personally own the underlying assets (e.g. VLS100 funds) yourself. It might become a faff to access the S&S, but you should still be the owner.

There's a whole separate issue about what would happen if *vanguard* went down somehow, but again they're index funds and you should still actually own the S&S of which the index fund is composed.

That's my understanding anyway - so I'm not convinced the risk is very high. Enough that I'd be willing to split across two platforms, and then probably leave it at that.

Anyone who'd like to set me straight on any of the above is very welcome :)

never give up

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #16 on: March 13, 2018, 06:53:44 AM »
Thanks cerat0n1a/aoedae- yes this is actually a much more complex area than it appears at first glance isnít it! I need to do some more digging on this. My pension is more of a concern. I think my ISA will never hit amounts worth worrying about in my personal situation.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #17 on: March 13, 2018, 07:04:30 AM »
thanks all for the discussion, it helps to get more info.

PropJoe

  • 5 O'Clock Shadow
  • *
  • Posts: 29
Re: Should I move to Vanguard UK ?
« Reply #18 on: March 13, 2018, 09:59:10 AM »
This is from the Vanguard UK website:

Quote
What happens if Vanguard becomes insolvent?

Your investments are held separately from Vanguard's own investments and are therefore not part of our balance sheet. All funds are registered in a nominee account and held in accordance with FCA rules. All money we hold for you is held in trust accounts with an authorised bank in accordance with FCA rules.

The segregation of your funds and money from Vanguardís own assets means that, in the unlikely event of Vanguard becoming insolvent, an insolvency practitioner would be able to identify assets held by investors and make sure they are returned to them as quickly as possible or transferred to another provider.


Are my investments covered by the Financial Services Compensation Scheme?

Yes. Vanguard is covered by the Financial Services Compensation Scheme (FSCS). You may be entitled to compensation from the Scheme if we are unable to meet our financial obligations to you. The maximum amount of compensation available depends on the type of investment business and the circumstances of the claim. Most types of investment business are covered up to a maximum of 100% of the first £50,000 under an eligible claim. The limits may change in the future. You can find further details at the FSCS website.

shelivesthedream

  • Magnum Stache
  • ******
  • Posts: 3515
  • Location: London, UK
Re: Should I move to Vanguard UK ?
« Reply #19 on: March 14, 2018, 02:48:15 AM »
This is from the Vanguard UK website:

Quote
What happens if Vanguard becomes insolvent?

Your investments are held separately from Vanguard's own investments and are therefore not part of our balance sheet. All funds are registered in a nominee account and held in accordance with FCA rules. All money we hold for you is held in trust accounts with an authorised bank in accordance with FCA rules.

The segregation of your funds and money from Vanguardís own assets means that, in the unlikely event of Vanguard becoming insolvent, an insolvency practitioner would be able to identify assets held by investors and make sure they are returned to them as quickly as possible or transferred to another provider.


Are my investments covered by the Financial Services Compensation Scheme?

Yes. Vanguard is covered by the Financial Services Compensation Scheme (FSCS). You may be entitled to compensation from the Scheme if we are unable to meet our financial obligations to you. The maximum amount of compensation available depends on the type of investment business and the circumstances of the claim. Most types of investment business are covered up to a maximum of 100% of the first £50,000 under an eligible claim. The limits may change in the future. You can find further details at the FSCS website.

So in practice, does this mean you're guaranteed to get £50k back if Vanguard tanked but you'd have to cross your fingers and hope for the rest? Or that you'd probably get the rest back but there's a chance you might not?

I transferred to Vanguard last year and the process was very simple. A bit of waiting around, but they are very good at responding to messages. I'm also waiting for news of their SIPP offering this year. However, I'm planning for new investments to be mainly in a LISA which Vanguard doesn't offer... though I'd probably go for it if they did! I'm not a very sophisticated investor and just want a simple life, really!

PropJoe

  • 5 O'Clock Shadow
  • *
  • Posts: 29
Re: Should I move to Vanguard UK ?
« Reply #20 on: March 14, 2018, 05:39:32 AM »
I'm not an expert in this area but I believe this setup is quite common in banking, i.e. the customer money is seperate from the company so not considered a company asset should they fall into trouble.

I think your assumption is right, only £50k guaranteed. However, I think it is highly likely you would keep your money even in the unlikely event of VG going insolvent.
When I reach FI, I expect to have my money fairly evenly split betwen pension and VG ISA. I'm not going to setup multiple ISA platforms as the risk is minimal in my opinion.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #21 on: March 14, 2018, 05:47:51 AM »
I'm not an expert in this area but I believe this setup is quite common in banking, i.e. the customer money is seperate from the company so not considered a company asset should they fall into trouble.

I think your assumption is right, only £50k guaranteed. However, I think it is highly likely you would keep your money even in the unlikely event of VG going insolvent.
When I reach FI, I expect to have my money fairly evenly split betwen pension and VG ISA. I'm not going to setup multiple ISA platforms as the risk is minimal in my opinion.

Thanks PropJoe

Playing with Fire UK

  • Handlebar Stache
  • *****
  • Posts: 2269
Re: Should I move to Vanguard UK ?
« Reply #22 on: March 14, 2018, 05:55:48 AM »
I believe the 50k guarantee would typically be called upon if Vanguard (or whoever) had done something fraudulent or stupid and not kept the customer's money or funds separately. In that case, you'd still be entitled to whatever was left of your money less the cost of retrieving it.

If I was bothered about institution risk I'd mitigate it by having offline copies of my statements, I think I'm more likely to have problems demonstrating what is mine rather than getting back what I can demonstrate. I'm thinking if Vanguard had the mother of all computer failures or thefts.

This was meant to be reassuring...

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #23 on: March 14, 2018, 05:59:46 AM »
I believe the 50k guarantee would typically be called upon if Vanguard (or whoever) had done something fraudulent or stupid and not kept the customer's money or funds separately. In that case, you'd still be entitled to whatever was left of your money less the cost of retrieving it.

If I was bothered about institution risk I'd mitigate it by having offline copies of my statements, I think I'm more likely to have problems demonstrating what is mine rather than getting back what I can demonstrate. I'm thinking if Vanguard had the mother of all computer failures or thefts.

This was meant to be reassuring...

lol :) appreciate the info though, and i like the idea of keeping online statements too.

shelivesthedream

  • Magnum Stache
  • ******
  • Posts: 3515
  • Location: London, UK
Re: Should I move to Vanguard UK ?
« Reply #24 on: March 14, 2018, 07:09:18 AM »
I'm not an expert in this area but I believe this setup is quite common in banking, i.e. the customer money is seperate from the company so not considered a company asset should they fall into trouble.

I think your assumption is right, only £50k guaranteed. However, I think it is highly likely you would keep your money even in the unlikely event of VG going insolvent.
When I reach FI, I expect to have my money fairly evenly split betwen pension and VG ISA. I'm not going to setup multiple ISA platforms as the risk is minimal in my opinion.

I believe the 50k guarantee would typically be called upon if Vanguard (or whoever) had done something fraudulent or stupid and not kept the customer's money or funds separately. In that case, you'd still be entitled to whatever was left of your money less the cost of retrieving it.

If I was bothered about institution risk I'd mitigate it by having offline copies of my statements, I think I'm more likely to have problems demonstrating what is mine rather than getting back what I can demonstrate. I'm thinking if Vanguard had the mother of all computer failures or thefts.

This was meant to be reassuring...

I am adequately reassured! I am a bear of very little brain, and complicated investments bother me. :)

PhilB

  • Bristles
  • ***
  • Posts: 356
Re: Should I move to Vanguard UK ?
« Reply #25 on: March 16, 2018, 07:48:27 AM »
Partial means you can leave behind any non-vanguard funds or stocks. I'll be doing this since I hold an old crappy stock which is still in the red, want to hold it rather than realising the losses.

Obviously, being British, we don't do face punches in this part of the forum, but I do think this warrants at least some gentle finger wagging.  The money you have lost on this stock is a sunk cost and therefore completely irrelevant to your future decision making.  The only reason to keep holding that 'crappy stock' is if you have good reason to believe it will outperform the market - which doesn't seem to fit with your description of it!  If not, then man up, sell it and buy the index instead (or at least something else you have faith in.)  Keeping something you believe to be a dog just so you don't have to realise the loss may soothe your vanity, but is not good for your stache.

PropJoe

  • 5 O'Clock Shadow
  • *
  • Posts: 29
Re: Should I move to Vanguard UK ?
« Reply #26 on: March 16, 2018, 08:53:54 AM »
Partial means you can leave behind any non-vanguard funds or stocks. I'll be doing this since I hold an old crappy stock which is still in the red, want to hold it rather than realising the losses.

Obviously, being British, we don't do face punches in this part of the forum, but I do think this warrants at least some gentle finger wagging.  The money you have lost on this stock is a sunk cost and therefore completely irrelevant to your future decision making.  The only reason to keep holding that 'crappy stock' is if you have good reason to believe it will outperform the market - which doesn't seem to fit with your description of it!  If not, then man up, sell it and buy the index instead (or at least something else you have faith in.)  Keeping something you believe to be a dog just so you don't have to realise the loss may soothe your vanity, but is not good for your stache.

You make a good point Phil. However, in this case, I feel justified in holding on to this stock. It's a relatively small holding (less than 1% of my stash) and I believe it has potential upside that would significantly outperform the market.
I made this investment in my pre-MMM naivety and the risk/reward is far too high for my taste now. However, given I'm aready invested, I'm going to stay on for the ride, the downside is not significant enough to affect my time to FI.

PhilB

  • Bristles
  • ***
  • Posts: 356
Re: Should I move to Vanguard UK ?
« Reply #27 on: March 16, 2018, 10:17:47 AM »
Partial means you can leave behind any non-vanguard funds or stocks. I'll be doing this since I hold an old crappy stock which is still in the red, want to hold it rather than realising the losses.

Obviously, being British, we don't do face punches in this part of the forum, but I do think this warrants at least some gentle finger wagging.  The money you have lost on this stock is a sunk cost and therefore completely irrelevant to your future decision making.  The only reason to keep holding that 'crappy stock' is if you have good reason to believe it will outperform the market - which doesn't seem to fit with your description of it!  If not, then man up, sell it and buy the index instead (or at least something else you have faith in.)  Keeping something you believe to be a dog just so you don't have to realise the loss may soothe your vanity, but is not good for your stache.

You make a good point Phil. However, in this case, I feel justified in holding on to this stock. It's a relatively small holding (less than 1% of my stash) and I believe it has potential upside that would significantly outperform the market.
I made this investment in my pre-MMM naivety and the risk/reward is far too high for my taste now. However, given I'm aready invested, I'm going to stay on for the ride, the downside is not significant enough to affect my time to FI.
Fair enough.  If I was being mean, I might say 'Would you buy it today at this price?  If not then sell it' , but loss aversion is a natural human trait and there probably isn't enough upside for you in that course of action to justify the pain.  In the interest of fairness, I should admit that I've still got various small bits of random funds in my pension from my pre-MMM days that don't fit my strategy and which I should be doing precisely that with, but I'm close enough to FIRE that leaving them alone won't hurt me!

shelivesthedream

  • Magnum Stache
  • ******
  • Posts: 3515
  • Location: London, UK
Re: Should I move to Vanguard UK ?
« Reply #28 on: March 16, 2018, 10:30:03 AM »
Partial means you can leave behind any non-vanguard funds or stocks. I'll be doing this since I hold an old crappy stock which is still in the red, want to hold it rather than realising the losses.

Obviously, being British, we don't do face punches in this part of the forum, but I do think this warrants at least some gentle finger wagging.  The money you have lost on this stock is a sunk cost and therefore completely irrelevant to your future decision making.  The only reason to keep holding that 'crappy stock' is if you have good reason to believe it will outperform the market - which doesn't seem to fit with your description of it!  If not, then man up, sell it and buy the index instead (or at least something else you have faith in.)  Keeping something you believe to be a dog just so you don't have to realise the loss may soothe your vanity, but is not good for your stache.

You make a good point Phil. However, in this case, I feel justified in holding on to this stock. It's a relatively small holding (less than 1% of my stash) and I believe it has potential upside that would significantly outperform the market.
I made this investment in my pre-MMM naivety and the risk/reward is far too high for my taste now. However, given I'm aready invested, I'm going to stay on for the ride, the downside is not significant enough to affect my time to FI.

I was in that situation when I discovered index fund investing. I gave myself a time limit. I set a notification to sell when it reached the price I bought it at, and promised that if it hadn't got that high in a year, I'd sell anyway. I think I had four individual stocks - two made their original price, two didn't and I sold at a small loss.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #29 on: March 26, 2018, 02:17:31 AM »
hi again all,

so thank you for all the feedback on moving to vanguard from CSD.. we'll likely be doing that after Apr 5.

The next question I have is about the Life Strategy series. After receiving good advice from here as newbie investors, we originally opened a VLS 60 and now have about £33k in that. I am 42 and my OH is 47. We are fairly risk adverse, hence the 60 but also want to retire fairly early (both within 8 years) so are looking at ways to quicken that a little without being too risky. After a few years with the VLS 60 and getting comfortable with investing, wonder if we should now buy some VLS 80 (possibly making a 70 by a mix of the two..). Any thoughts on this? I know the VLS auto adjust too.

Thanks!

never give up

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #30 on: March 26, 2018, 01:28:39 PM »
Hi Jade

Iím only really a beginner here myself and certainly no expert. Itís really for each of us to derive an asset allocation that we feel comfortable with. If you have learnt more over the few years you have been investing and feel more comfortable then thatís great. What concerns me a little here is you mention you are a little risk averse but then want to try to Ďquickení things. Iím not sure things can be Ďquickenedí without veering off the indexing path and going down the stock picking route or letís put everything on black in a casino! The simplicity and joy of the approach favoured on here is that in the long term reducing expenditure and investing in funds such as the LifeStrategy funds is highly likely to see us achieving our goals. However I appreciate youíre only referring to changing from 60% stocks to 70% here and nothing so dramatic.

With a time horizon of only 8 years a 60:40 allocation sounds fairly sensible to me but what is the purpose of this investment? Is it a pot that will be run down at which point another pot kicks in e.g. a SIPP? Iíve seen examples where a 60:40 allocation become 40:60 over this sort of timeframe. When someone has a single stash they tend to stick with their 70:30, 80:20 or whatever. Again Iím no expert here but Iíve seen examples posted of both approaches.

If the market fell 10%, 20%, 30% or 40% have you looked at how that would affect the LS60 versus the LS80? Would you be comfortable with that? Or at what point would you feel uncomfortable? There are many examples of people being 60, 70, or 80% stocks and they all seem to be reasonable and suit peopleís requirements and attitude to risk.

My only other point (and I'm not sure of the forums opinion here, did I mention Iím not an expert!) but the VGLS funds on their own seem to be a great fund for the young and or anyone looking for simplicity. However at the point of drawing on the funds I tend to think itís better to have 60% (or whatever) in the VGLS100 fund (or similar) and 40% in dedicated bond funds. That way you can draw on the bond specific part of your portfolio in the early years and leave your stocks alone. This is especially important if the market was to fall in your early years of drawing down. There may be people completely happy drawing down on the LS80 or 60 but Iím not sure I would be comfortable myself.

The JL Collins Stock Series, Monevator etc all have useful articles on asset allocation. It may be worth reading these if you havenít already.

Good luck with your plans.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #31 on: March 27, 2018, 03:06:22 AM »
Hi never give up,

That is really helpful, thank you for taking the time to reply.

VLS 60 I think was recommended here because of our age and being fairly risk adverse and I think is probably the right one overall for us but you're right to pick up on the dichotomy of wanting to quicken things though! We are both feeling a little frustrated with our work situations and wanting to bring the retirement date forward which has led to this question but I know we wouldn't want to veer off the index path and need to be patient. I guess we thought maybe adding a little VLS 80 to the mix might be interesting now we're more comfortable but as you said, it depends on the intention.

The purpose of the investment is for a retire early pot... either by drawing on the interest or possibly running it down till state pension age (or a mix of the two).

Could you explain more about this: "Iíve seen examples where a 60:40 allocation become 40:60 over this sort of time frame." do you mean they auto adjust? or something that happens due to drawing down?

Good questions re: the market dropping, we'll both out some more thought into that and our attitude to risk now we're a few years down the path.

Ah ok, re drawing funds and the VGLS100 fund (or similar) and 40% in dedicated bond funds - thanks for that advice, we hadn't thought about that so that's good to know. When the time comes, can we just convert 60% of the VLS60 to VGLS100?

I'll have another read of those other sites - thanks again. :)

never give up

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #32 on: March 27, 2018, 10:49:25 AM »
No probs. I share your frustration with a work situation and wanting to bring the retirement date forward! Generally on here there are no get rich quick schemes as I appreciate you know. It is slow but it works. If bringing your retirement date forward is a goal that means more to you than anything else, then the way to speed things up that is in your control, is to reduce your expenses bringing your FIRE number down. Alternatively and not quite in your control to the same extent is to increase your incomes. Can you get a promotion, apply for a new job, bring in a second income somehow? If you can do both and reduce your expenses and increase your income then you will notice a big difference in your date. I appreciate that is a lot easier said than done.

So sorry by the 60:40 becoming a 40:60 I was referring to a change of allocation over time to reduce risk as the time horizon shortens. Over a 10 year period someone could change their 60:40 allocation on an annual basis by 2 percentage points e.g. 58:42 after the first year etc ending up at a target allocation of 40:60 when they want to start drawing on the money. This would be seen as too defensive to sustain someone in a 30+ year retirement but if it's a pot filling the time to when another pot kicks in it may be suitable. I.e. protecting the pot is more important than growth. They would do this either by annually selling some stocks to buy some bonds or by changing their investment amounts accordingly.

Drawdown I have found is the most complex aspect of investing. In reducing risk at the time of retirement many will then increase their stock allocation back up to a 70:30 or whatever after a few years. I think this is what's known as a reverse glide path. Again the sites mentioned cover these aspects far better than I could. Please do your own research and search on this forum for any topics you need more clarification on as there is lots of good stuff on here. I'm sure others will also help you as well. As previously mentioned I'm new to most of this stuff myself.

You would be able to do a switch or transfer for whatever percentage you would like into a new fund or funds. If you were going with this approach you would want to do this in advance of your retirement date as the point is to protect you from a downturn right before you retire.

Does your state pension cover your annual expenses or do you need this pot to partially sustain you beyond state pension age as well? I assume this pot needs to cover round 12 years of expenses as a minimum?

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #33 on: March 28, 2018, 05:22:13 AM »
Hi again never give up,

Thanks - as you said, this way is slow but it works. We are looking at ways to further reduce expenses (we're currently living on £12k per year for the two of us) but have identified a few more areas to trim. Income wise, for a variety of complex reasons, that will stay the same for now but we're feeling positive overall and both on the same page about saving for retirement being a priority so it's all good.

Thanks for explaining about a change of allocation over time and how to do that - we can have  a look into what might suit & will look into a reverse glide path too - haven't heard that before so will do some more research.

Our two state pensions will cover our annual expenses so the pot in theory shouldn't need to sustain us beyond state pension age and yes we're aiming at something like 12 years of expenses as a minimum.

Our house in the SE is worth about £200k and we are mortgage free so the other back up plan we have is to move to a LCOL area at some point (there is quite a few nice 2 bed houses in different parts of Wales for £85k for e.g.).

Thanks again!

never give up

  • Pencil Stache
  • ****
  • Posts: 696
  • Location: UK
Re: Should I move to Vanguard UK ?
« Reply #34 on: March 28, 2018, 05:40:43 AM »
Thatís a really impressive level of expenses for you both. Congrats on that and I wish you luck with your plans.

jade

  • Stubble
  • **
  • Posts: 183
Re: Should I move to Vanguard UK ?
« Reply #35 on: March 28, 2018, 05:50:12 AM »
thank you for all your help :) all the best to you too.

Just_Looking_Here

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Should I move to Vanguard UK ?
« Reply #36 on: April 11, 2018, 05:14:03 PM »
If you look on the Vanguard Uk website they mention the SIPP is expected in late 2018 and you can register for updates.