Case Studies
Client Profile: Elaine
Risk Tolerance: Moderate
Investing Experience: Novice
The client, seeking a straightforward and cost-effective approach to their pension, opted for an "off the shelf" SIPP (Self-Invested Personal Pension) offered by EPL. This is our most cost effective option for smaller pots, and was perfect for Elaine who had 3 smaller pensions she wanted to combine. By bringing them all in to one SIPP helped reduce her overall costs and made it easier for Elaine to keep track of.
Being a relatively novice investor Elaine opted for an actively managed approach for her pension and chose a Discretionary Managed Account (DMA) offered by an Isle of Man-based wealth management firm. This strategy involved delegating investment decisions to a professional portfolio manager who constructed a diversified portfolio tailored to the client's specific needs and risk tolerance, which they will actively manage.
The key benefits of the DMA approach are:
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Personalised Investment Strategy: The portfolio manager will tailor the investment strategy to the client's risk profile and goals.
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Active Management: The portfolio manager will actively buy and sell securities to capitalise on market opportunities and mitigate risks.
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Professional Expertise: The client benefits from the expertise of experienced investment professionals.
The client receives regular updates on the performance of their portfolio via online access to their investment account and can monitor the performance easily.
Client Profile: Peter
Risk Tolerance: Moderate
Investing Experience: Intermediate
Peter has had experience investing and considers himself an intermediate investor, he understands various investment vehicles and markets but likes to stick with what he knows best. For this client, seeking more flexibility in the investment options he has in his pension it was clear that a bespoke SIPP was the preferred choice.
With a bespoke SIPP Peter can choose individual funds and possibly some shares of selected companies, to access these we opened an execution only account for his pension with a local investment manager. Peter has trading authority over the account and with online access he can react to situations as he wishes to take advantage of or protect from market fluctuations in a much timelier way.
The key benefits of the bespoke approach are:
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Investors can choose specific funds that align with their investment goals, risk tolerance, and time horizon.
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They can actively manage their portfolio by buying, selling, or switching funds as needed.
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They can react to market changes and economic trends more quickly than a managed fund might.
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While managed funds charge management fees, individual unitised funds often have lower expense ratios.
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Investors have a direct view of the underlying assets held within each fund by the disclosures available in the fund fact sheets.
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Fund performance and holdings are typically more straightforward to understand.
As Peter is comfortable managing his own investments the greater flexibility afforded by an EPL bespoke SIPP was the perfect fit for him.
Client Profile: Lawrence
Risk Tolerance: Moderate
Investing Experience: Intermediate
Lawrence had a SIPP with another provider, but he was not able to invest it as he wanted so he came to EPL to see how we could help. The client had been a little uncomfortable with how the markets had fluctuated so much over the previous couple of years and decided he wanted to invest his pension in property. He has two options; on the one hand he could use his pension pot to buy a commercial property or he could buy a residential buy-to-let property.
Lawrence wanted to keep costs down by managing the rental property himself and on that basis, he felt much more comfortable with a residential buy-to-let. Having transferred his pension to a bespoke EPL SIPP Lawrence quickly identified a suitable property, a small block of 4 flats. We confirmed with the client that he could take out a mortgage in his SIPP to make up the capital needed for the purchase. As the mortgage required would be below the maximum limit of 50% of the pension pot, Lawrence was able to purchase the property he wanted.
The key benefits of the holding a rental property in your SIPP are:
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Owning a physical asset can provide a sense of security and control.
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Property values tend to rise with inflation, offering a potential hedge against its effects.
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Buy-to-let properties generate consistent rental income, providing a steady, predictable returns.
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Property values can increase over time, leading to capital appreciation.
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Using a mortgage to finance a property can amplify returns if property prices rise.
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Adding real estate to a portfolio can diversify risk, as it may not correlate directly with stock market fluctuations.
However, it's also important to consider the drawbacks of buy-to-let property investment:
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Purchasing a property requires a significant upfront investment.
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Managing tenants, maintenance, and legal issues can be time-consuming.
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Property values can decline, and rental income can fluctuate.
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When the time comes to sell the property, it can take time and involve significant costs.