SIPPs (Self-Invested Personal Pensions) are flexible retirement saving vehicle, offering choice, freedom and investment opportunity.
However, as it is by definition, self-invested, a SIPP also brings with it certain amount of responsibility. Of course, the burden can to some extent be minimised if you have a financial adviser or wealth manager to act on your behalf, but even if you take advice, there may still be an element of DIY investment to your SIPP.
So, the following are our three golden rules for SIPP investments:
- Speak to a financial adviser
- Keep up to date with your SIPP
- Stay disciplined
Take Advice, Even if it is You who Ultimately Makes the Decisions
When choosing a SIPP, there will be important decisions to make about where to invest your money, and the options will be varied and many. To the layperson, choosing which trusts, funds, exchange traded funds, shares and other securities to invest in can feel like choosing your dinner from a menu written in Sanskrit.
A 2017 Financial Conduct Authority report warned that too many retirement investors simply opt to use their provider’s default SIPP drawdown scheme, instead of scouring the market for a better deal. This position has been supported by data from the Association of British Insurers (ABI). The ABI did find, however, that in cases where savers took financial advice they were much more likely to take opt for an alternative.
In order to work out which the best choice of SIPP for your requirements, you will first need to establish your investment goals. A good expat investment adviser or wealth manager can help you do this. Investing in a SIPP without first defining your investment goals can be a rudderless and disorientating experience. It is almost impossible to choose the right SIPP platform if you cannot first identify your risk profile and goals, as well as how much functionality you will require.
Education is not only critical for helping you make the right SIPP decisions, it can also help you stay confident and disciplined throughout the investment process. This can help you avoid making knee-jerk decisions when faced with short-term volatilities or fluctuations in the market.
This is true regardless of whether you are a conservative, balanced or adventurous investor; being aware of where your portfolio sits in the market and how it aligns with your profile and goals is a good way to help you be empowered rather than being a passive investor.
A good financial adviser will be happy to answer your investing questions and to help you understand your portfolio and can help any expat.
Discipline is Likely to be Key to Your Long-Term Goals
If you, like most SIPP investors, are playing the long game, you should largely ignore the short-term market noise. Providing you have a well-diversified SIPP portfolio, you should not be unduly concerned by short-term peaks and troughs. This means you should try to avoid ‘timing the market’ to ‘sell high and buy low’; it is almost impossible to do this unless you know something that other investors don’t.
However, if you are about to reach retirement, you may wish to ensure that your portfolio is protected from any sudden downward trend that could affect the amount of capital you have available for drawdown.
One way to do this is to make income withdrawals from whichever asset class is experiencing robust health at the time of drawdown. This way you do not have to sell when prices are low. Being able to do this is yet another benefit of true diversification.
SIPPs Advice from Blacktower
Blacktower’s expat financial advisers can help you understand all the important issues that are related to pensions, pension transfers and SIPP investment. – by Tim Govaerts, Associate Director and Regional Manager Costa del Sol