Author Topic: Specific fund for a particular job (UK)  (Read 1991 times)

UKstache

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Specific fund for a particular job (UK)
« on: August 24, 2017, 02:33:13 AM »
The UK Lifetime ISA (LISA) allows you to invest £4000 per year and receive a 25% bonus, making £5000 a year total. You can pay in until you’re 50 but can’t access it until age 60 for retirement purposes. Given that I’m 38 that means I can contribute for 12 years and there’s a 22 year timescale to the whole thing. The money is tax free on withdrawal. I’m a lazy, minimal ongoing management type, so should I…

 

1.       Stick to my 80/20 stocks/bonds allocation (Vanguard Lifestrategy, so with auto rebalancing) I use in my other investment vehicles since that is what I’ve decided I’m confortable with risk/reward wise? (is there a non-vanguard one which has a different fund mix I could use for more diversification?)
2.       Be more aggressive because of the long timeline, this would probably mean 100% stocks so losing rebalancing?
3.       Pick a retirement type fund which gets automatically weighted towards bonds as the time I can access the money gets closer (I’m not 100% sure I’ll need the money at that point or not, its 22 years away) This might limit my growth potential. I think these type funds would likely be more conservative than 80/20 even from the moment I took it out.
4.       Something else I haven’t thought of.
 
Thanks!

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FI4good

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Re: Specific fund for a particular job (UK)
« Reply #1 on: August 31, 2017, 04:31:14 AM »
With an LISA you are saving post tax money, after national insurance and income tax, the 25% bonus might not be such a good deal as in reality it's just a tax refund and you're locking money away till your 60.

if you put money in a pension from your gross pay you can currently access it at 55, this might be changing to 58 soon .

It depends on your current tax rate, pension contributions and what kind of income you expect to be paying tax on post fire . 

Personally i don't see the benefit of a LISA as compared to extra pension payments if you're not planning a property purchase .
« Last Edit: August 31, 2017, 04:44:21 AM by FI4good »

UKstache

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Re: Specific fund for a particular job (UK)
« Reply #2 on: August 31, 2017, 04:51:25 AM »
Thanks FI4good, I thought I wasn't going to get any responses there! I agree with your thoughts but think that a LISA is slightly advantageous for my particular situation. That's why I was asking about fund recommendations rather than the relative merits of the LISA itself. Does that make sense?

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FI4good

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Re: Specific fund for a particular job (UK)
« Reply #3 on: September 01, 2017, 05:58:33 PM »
It makes sense, i tend to look at my accounts holistically, i think this allocation gives me a reasonably diversified spread without chopping up my money into piffling amounts.

My allocation over a few accounts is approx:-

2% cash
3% Ishares corp bond index fund
3% Vanguard UK investment grade bond index
6% pacific index tracker
6% japan index tracker
5% L&G uk property feeder
6% M&G feeder of property portfolio
19% vanguard ftse all share
25% vanguard us (VUSA) 
the rest Vanguard EU ex uk index tracker

Note that i used VUSA rather than VUSD , VUSD the dividends are paid in USD, under ISA rules you can't hold dollars in an ISA wrapper so your provider will exchange USD/GBP at whatever rate they see fit , if you buy VUSA the dollar to gbp conversion is done by vanguard at the cheapest rate they can, if i remember correctly.

Cheers FI4
« Last Edit: September 01, 2017, 06:02:31 PM by FI4good »

UKstache

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Re: Specific fund for a particular job (UK)
« Reply #4 on: September 02, 2017, 01:33:17 AM »
It makes sense, i tend to look at my accounts holistically, i think this allocation gives me a reasonably diversified spread without chopping up my money into piffling amounts.

My allocation over a few accounts is approx:-

2% cash
3% Ishares corp bond index fund
3% Vanguard UK investment grade bond index
6% pacific index tracker
6% japan index tracker
5% L&G uk property feeder
6% M&G feeder of property portfolio
19% vanguard ftse all share
25% vanguard us (VUSA) 
the rest Vanguard EU ex uk index tracker

Note that i used VUSA rather than VUSD , VUSD the dividends are paid in USD, under ISA rules you can't hold dollars in an ISA wrapper so your provider will exchange USD/GBP at whatever rate they see fit , if you buy VUSA the dollar to gbp conversion is done by vanguard at the cheapest rate they can, if i remember correctly.

Cheers FI4
Thanks, great food for thought!

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Playing with Fire UK

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Re: Specific fund for a particular job (UK)
« Reply #5 on: September 02, 2017, 02:16:59 AM »
22 years out, I'd be in 100% stocks. If you like Lifestrategy, you could contribute to LS100 for now. When you get to your contributions at age 48,49,50, consider LS40 or LS60 to add some bonds in. I prefer this approach in general, because it means when you get to drawdown, if bonds are strong you can sell the bonds to rebalance and if stocks are strong you can sell the stocks.

This does kind of assume that you are unlikely to need the funds before age 48 at the same time as a market crash.

I don't like the retirement focused funds. They made a lot of sense when it was almost mandatory to buy an annuity in a certain year, but the situation is so different now. You could look at whether setting the target year for when you are 80 gives you a pattern you are happy with.

UKstache

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Re: Specific fund for a particular job (UK)
« Reply #6 on: September 02, 2017, 03:58:27 AM »
22 years out, I'd be in 100% stocks. If you like Lifestrategy, you could contribute to LS100 for now. When you get to your contributions at age 48,49,50, consider LS40 or LS60 to add some bonds in. I prefer this approach in general, because it means when you get to drawdown, if bonds are strong you can sell the bonds to rebalance and if stocks are strong you can sell the stocks.

This does kind of assume that you are unlikely to need the funds before age 48 at the same time as a market crash.

I don't like the retirement focused funds. They made a lot of sense when it was almost mandatory to buy an annuity in a certain year, but the situation is so different now. You could look at whether setting the target year for when you are 80 gives you a pattern you are happy with.
Thanks, you've pretty much articulated what I'm thinking at the moment!

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