Good time to start a pension with a lump sum?

scuttler617

I'm 35 and have yet to start a pension. In addition to a rainy day pot and some other stocks and shares ISAs I have about GBP7000 that I could invest as lump sum, probably into a Scottish Widows personal pension plan. Subsequent to that I intend to pay about GBP700 per month into the fund.

Assuming you believe in pensions I know there is no bad time to start one, and the earlier the better, but is it wise to invest a lump sum in the current financial climate? As I understand it with the stock market low as it is, I would get far more units for this money than I typically would with a bouyant market. Of course the value of those units could continue to fall but as a long term investment I would expect them to come up over the course of the investment period.

Am I missing anything here and should I invest the lump sum or would I be better putting the GBP7000 elsewhere and trickling it into the pension fund?

Regards

Matt

sdooley

The sooner you start a pension the better. But a habit of regular contributions is likely to mean more goes into the pension than the size of a one-off contribution.

Why not put half of it in and then try to pay £500 a month, part from your savings, part from your salary, for a year or two. If all is going well, you might find yourself able to continue.

dunstonh

I'm 35 and have yet to start a pension.

Ouch. You have some catching up to do then. Ideally a 35 year old should be looking to have around £35k in their retirement pot (one of those rough guide statements).

Subsequent to that I intend to pay about GBP700 per month into the fund.

Thats a healthy figure that should allow you to catch up!

is it wise to invest a lump sum in the current financial climate?

You mean when the market is nearly at its lowest point in the last 4/5 years? Over the long term, it looks very attractive. In the short term it could still be volatile but thats where the monthly contributions come in.

Now could be a good time to invest. Current pricing is not near the bottom. That was in Nov last year and we have had over 10% growth since then. However, it is still low. However, it could go down again. No-one knows.

This is why you spread your investments though and dont stick all your eggs in one basket.

MrMicawber_2

I'd put all the 7k in the pension but initially put most, say 6k into a cash option (assuming there is one) with 1k'ish into your first choice fund and then transfer the rest into the funds of your choice over the course of the next 12 months. Need to check out any extra costs though. You could just drip feed the 7k in from a savings account over the next 12 months as well.

scuttler617

Thanks all for your comments.

dunstonh wrote: »

This is why you spread your investments though and dont stick all your eggs in one basket.

Dunston, in this comment are you advocating use of both pension and non-pension wrappers for investments, or within a specific pension to spread the pot across multiple and diverse funds?

I'd be keenest making regular contributions to a pension and any excess I encounter on the way can go towards the mortgage or in a cash or S+S ISA.

Regards

Matt

missile

Alx_B wrote: »

I might finally be debt free sometime in the next few months!

I would clear any debts (excluding low interest / mortgage) before investing a lump sum into a pension.

dunstonh

Diversification is achieved by how you invest and the funds you choose. Not the actual administrator. e.g. You dont diversify by picking norwich union and scot widows. You diversify by picking Europe, Asia, UK etc.