I’ve recently discovered the concept of Index Fund tracking and would like to give this a go to save on fees with my ISA and maybe my pension as well.
So I plan to transfer my £26k Nutmeg ISA into an InvestEngine portfolio. I may need to start drawing out of this fund in around 5 years or so. I’m 57 and looking to retire in around 5 years. I will be contributing £400 a month into the fund.
Being new to this I have a few questions.
Does it matter when I transfer the £26k across - are there any issues with timing ?
I was going to keep things very simple with a 60/40 split and just two funds:
Vanguard FTSE All World (VWRP) 60%
Vanguard Global Aggregate Bonds (VAGS) 40%
Does this seem a reasonable plan?
I’m far more nervous about transferring my personal pension into Index Funds as that has £200k in it but I am tempted as this is an Actively Managed scheme with fees of £3k a year or so. I also pay £400 a month into that. Maybe when InvestEngine start their SIPP option I will think about that. Would a similar portfolio be sensible for the pension as well? I would expect to start some sort of draw-down from this pension in 5 years or so and stop paying into it. But it would remain invested so would actually be a much longer term investment than the ISA
In terms of timing - I think there are broadly 2 types of transfers - in-specie and cash. For in-specie the actual funds you are invested in are transferred to the new platform and hence you remain invested through out the transfer period and so timing is not a consideration. For a cash transfer your old provider will sell the investments you have and transfer cash to the new provider where it will await your instructions to invest. The time it takes between the old provider selling and the cash available to you at the new provider is likely to be several days at least - and hence there is an element of being out of the market, which could ‘benefit’ you or ‘cost’ you depending on if the market rises or falls whilst you are in cash. I suspect it’s impossible to know in advance if its a good or bad time to pull the trigger on a transfer!
Your new provider should be able to help with knowing if they’ll be able to handle in-specie transfer or if it will need to be cash
There maybe some other elements of timing that I haven’t thought of.
The chap on the “PensionCraft” Youtube channel runs a two or three ETF portfolio which contains the VWRL etf which is the income distributing version of VWRP, which would indicate that its a reasonable choice… “PensionCraft” may be a good place to start if you are new to this.
Well done. I too am fairly new to index funds and I’m the same age, but I have done a lot of personal research on investments and pensions. I hope to retire between 60 and 62 so it looks like we have a few things in common.
You asked about transfer and issues with timing. I believe timing doesn’t matter. You could wait forever for a “right time” to transfer. Funds can go up or down almost daily. The important thing is really the fees you are charged by the provider to cover your investment and how long you may be out of the market while the transfer takes place. Looking at Nutmeg’s site it looks like your fees are quite high so Invest Engine is an excellent way to reduce your costs.
I recently transferred from Fidelity in a World Tracker fund to S&P 500 on IE. Despite my ISA having an out of the ordinary scheme number, IE Support were excellent in arranging the transfer by my confirmation of the fund references and I was only out of the market just over a week.
Once the transfer is complete you will be able to set up a Savings Plan for your £400 and you can allocate the % your state with the autoinvest feature doing the work for you.
You asked if this was a reasonable plan. This is entirely up to you (scary eh!). Unless there is a qualified Financial Adviser on the forum, everyone else can only give an opinion based on their own circumstances rather than advice on whether you have done this right. For myself, I would find those funds a bit cautious for my ISA, though I would expect this to a good proportion for a pension given the time to retirement. I have gone a bit more adventurous keeping to stocks/shares funds rather than bonds which still seem to be settling after the big crash last year. Only you know your circumstances and attitude to risk though.
Your pension fees sound incredibly high particularly based on the amount you pay in (£4800 in and £3000 out only leaves £1800 to actually give you a return). You may want to consider moving that sooner rather than later. In the absence of any SIPP from IE as yet, then Vanguard do seem to have the lowest fees in the market at the moment with a platform fee of 0.15% capped at £375 and maybe Target Retirement 2030 with the proportions mentioned above around 0.24%. This would be about £780 per year for your £200K.
It all come down to how confident you are doing this for yourself. I watched a lot of YouTube videos and would recommend the following to build your confidence and knowledge:
MeaninfulMoney - Pete Matthew presents who is a Financial Adviser based in Cornwall. Lots of stuff on how to do things for yourself. Pete also has a course called Retirement Academy for around £700 I think that takes you through a lot of information with access to a powerful cash flow modelling application called Voyant Go. Pete’s firm (Jackson Wealth) can also do a fee only Financial Advice service for around £4000)
Chris Bourne - Another independent FA with lots of information
James Shack - Yet more good videos and also a link to a Google Sheets spreadsheet that you can use to plan your retirement finances.
The basis of all their learning though is to budget and to understand now what your current outgoings and income are.
I’d second the advice to please get professional financial advice.
As a much younger investor, personally my approach is much more accepting of risk. But I’m not planning on retiring for 20+ years (and even then will accept a higher degree of risk than you are likely to). Your global diversification seems like a good idea and you have chosen some relatively low-fee ETFs.
Two things I would consider (beyond speaking to a professional):
commodities - these offer a different sort of hedge against market crashes. I have chosen CRBL (Amundi Bloomberg equal-weight commodities ex agriculture).
money markets - as we are experiencing high inflation and high interest rates, and you are not looking to invest long term, something like CSH2 (Lyxor Smart Cash) is an option.
These might not be right for you. My view is that in the current environment these would offer advantages over bonds, but please speak to a professional rather than taking my word for it.
