Investors who are building a future nest egg have time on their side and can ride out the sharp fall in risk assets. The situation for investors who are withdrawing an income from a self-invested personal pension is more nuanced.
Everyone can have both an Isa and a pension – and as each type of tax wrapper has advantages and disadvantages, investors should try to make the most of both products.
Savers seeking a cheap place to grow their nest eggs can pick from a new kid on the block, as fund giant Vanguard enters the self-invested personal pension (Sipp) market.
The passive investing behemoth says that its Sipp is now the lowest-cost Sipp available to UK savers. Its claim cites analysis by Platforum for the average British pension holder not yet in drawdown with a pot of £40,500.
In a new video series focused on investment funds, deputy editor Kyle Caldwell considers what investors should look for in a fund that they are pondering including in their Isa or Sipp.
He talks to multi-manager Rob Burdett of BMO Global Asset Management about desirable fund manager qualities, how much weight you should give to past performance, and succession planning after the departure of a star.
Watch their conversation here.
Most investors are familiar with the idea that diversification can help reduce the risk attached to their portfolio and smooth total returns over the longer term. It’s a simple principle: not having all your eggs in one basket means the risks of out-and-out failure – though also the chance of stratospheric success – are diluted. Moreover, even if holdings in a portfolio all do equally well over time, it’s likely that their fortunes will ebb and flow, so you should get a smoother ride.
Investors who hold money outside of the tax-free Isa wrapper should be taxed at a higher rate, an influential think-tank has proposed.
Wobbly markets may have given those contemplating retirement pause for thought. In recent years, managing a retirement portfolio has been like falling off a log: as long as the portfolio is invested in financial markets rather than cash, it’s been going up. However, recent volatility suggests this ‘in it to win it’ approach may not be as effective in future.
Investors using Isas are much more likely to hold individual shares than those using a Sipp, according to data from interactive investor (Money Observer’s parent company).
Figures revealed by the online broker show that as at February 2018, 47% of assets in Isas were in equities, compared to just 23% for Sipp investors.
Government proposals to improve self-employed workers’ engagement with pensions have been described as 'profoundly disappointing' by former pensions minister Steve Webb.
The government report shows that the number of self-employed workers saving into a pension has dropped from 30% in 2007-08 to just 14% in 2016-17.