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Old 20 Mar 21, 06:35 PM  
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#11
tspill
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Originally Posted by Tweety1 View Post
I knew there would be ppl in here that get this
So what is the difference between the life strategy and the retirement fund? Is there any? Trying to utilise the tax advantage you get with a pension...
The Lifestrategy funds have a FIXED weighting between equities and bonds (that is the number on the product name - e.g. VLS 40 is 40% equities and the rest bonds (Gilts are just UK Government bonds).

Vanguard's Retirement funds have a VARIALBE weighting.
Depending on your age and hoe long the retirement fund is for.
The Further away from your specified retirement date, the higher the %age in equities (higher risk). As you move through the years towards the retirement date, they will automatically de-risk your investment by shifting from equities to bonds. So as time moved on - the %age in equities reduced and with this the investment risk also reduces.
Derisking your investments as you get close to retirement is a big thing. You don't want to get close to the date you need the money (retirement) and have a huge stock market crash that halves your money. The retirement funds do this automatically.
Other companies such as Standard Life also offer these "life style" investments targeted at low maintenance retirement investments. They do the derisking for you.
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Old 20 Mar 21, 06:39 PM  
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disney332
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Originally Posted by tspill View Post
The Lifestrategy funds have a FIXED weighting between equities and bonds (that is the number on the product name - e.g. VLS 40 is 40% equities and the rest bonds (Gilts are just UK Government bonds).

Vanguard's Retirement funds have a VARIALBE weighting.
Depending on your age and hoe long the retirement fund is for.
The Further away from your specified retirement date, the higher the %age in equities (higher risk). As you move through the years towards the retirement date, they will automatically de-risk your investment by shifting from equities to bonds. So as time moved on - the %age in equities reduced and with this the investment risk also reduces.
Derisking your investments as you get close to retirement is a big thing. You don't want to get close to the date you need the money (retirement) and have a huge stock market crash that halves your money. The retirement funds do this automatically.
Other companies such as Standard Life also offer these "life style" investments targeted at low maintenance retirement investments. They do the derisking for you.
Cavet being that should you opt for the retirement fund, you must anticipate buying an annuity at retirement (ie giving the lot away (75%) for an income) rather than exploiting flexible retirement.

Disney332
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Edited at 06:42 PM.
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Old 20 Mar 21, 06:59 PM  
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amy56
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Thank you so much for responding Tspill thatís such a help 👍👍
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Old 20 Mar 21, 07:25 PM  
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tspill
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One more thing.

I have no idea of your employment situation, nor what pension offering they give you. But if you are working, before looking at a SIPP, it would be worth looking at what pension options your employer offers.

It would be worth finding out if they offer pension contributions through "Salary Sacrifice". If they do, not only will you save the 20% tax, but also 12% National Insurance (basic rate tax payer). 40% tax and 2% NI if a higher rate tax payer. This is particularly advantageous as a basic rate tax payer.
Also, many employers also add a pension contribution - sometimes matching (or even better) employee contributions.

If neither of these apply, there are often disadvantages of employee schemes - tied to one investment company; higher fees; limited investments (may not offer Vanguard for example).

My OH was in the Teachers Pension Scheme. She could make additional (AVC) pension payments, but they were with Prudential and weren't salary sacrifice so a SIPP was the way to go.
My company allowed salary sacrifice, and when I put in 8%, they added 13%. This was with Standard Life who offered all the funds I wanted to use so was a no brainer.

So worth find out about what your company offers before making any decisions.

Edited at 07:28 PM.
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Old 20 Mar 21, 07:27 PM  
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Originally Posted by disney332 View Post
Cavet being that should you opt for the retirement fund, you must anticipate buying an annuity at retirement (ie giving the lot away (75%) for an income) rather than exploiting flexible retirement.

Disney332
I don't think this is always the case. Mine is with Standard Life and I can move this into Flexible Drawdown. I am not required to go down the annuity route.

Edited at 07:28 PM.
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Old 20 Mar 21, 07:37 PM  
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disney332
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Originally Posted by tspill View Post
I don't think this is always the case. Mine is with Standard Life and I can move this into Flexible Drawdown. I am not required to go down the annuity route.
True, but if you derisk and decide to stay in the market in retirement, you have lost growth and incurred costs of selling, only then to repurchase equity content.

So you need to be sure you know what YOU want, pre strategy ..,pre retirement

Disney332

Edit...FYI when flexi retirement was introduced the annuity market collapsed
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Edited at 07:41 PM.
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Old 20 Mar 21, 07:40 PM  
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Tweety1
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Originally Posted by disney332 View Post
Cavet being that should you opt for the retirement fund, you must anticipate buying an annuity at retirement (ie giving the lot away (75%) for an income) rather than exploiting flexible retirement.

Disney332
I thought any retirement fund you have options? I didnít think you had to buy an annuity...
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Old 20 Mar 21, 07:42 PM  
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Originally Posted by Tweety1 View Post
I thought any retirement fund you have options? I didnít think you had to buy an annuity...
Edit: just seen your response.
This would always be for taking cash and drawdown so is the lifestyling an easier one to choose? I can still select the % I want for risk canít I?
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Edited at 07:46 PM.
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Old 20 Mar 21, 07:43 PM  
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disney332
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Originally Posted by Tweety1 View Post
I thought any retirement fund you have options? I didnít think you had to buy an annuity...
You dont, but see above... why de risk when you might stay in the market. It loses growth potential and costs you money.

Lifestyle funds were popular BEFORE flexi retirement was an option when 95% of retirees bought an annuity

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Old 20 Mar 21, 07:46 PM  
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disney332
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Originally Posted by Tweety1 View Post
Edit: just seen your response.
This would always be for taking cash and drawdown so is the lifestyling an easier one to choose?
You only derisk, if you plan to purchase an annuity at retirement, or have a zero risk tolerance at retirement,...because at retirement your equity content is 0%.

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