Pension transfers - reinvest immediately or drip feed?

Richie(UK)

Hi all,

I'm transferring two old pension funds into a new pension. Once the funds are in the new pension is the standard practice to reinvest immediately - on the basis that you are likely to be 'out and in' the chosen funds within a relatively short time span and with little movement in price - or to drip feed over a period of time, say a few months? Just curious.

bowlhead99

It sounds tempting to drip feed because people bang on about pound cost averaging and how it can make sense to do this when investing a tranche of new money. But to be honest, you have no insider knowledge about whether delaying this will result in it being more expensive or less expensive to buy the units you plan to buy in a few months rather than now. Over the last couple of years (and century, generally) the general direction of the market is up, so with no special insight into your appetite for risk or next month's market prices, one could say 'time in the market' is an important thing to achieve.

So I would say yes, standard practice is to reinvest immediately unlesss you have some special insight as to the direction of the markets in the next few months.

Consider this: before the decision to transfer, in one or both of those old plans, would you have called the manager up in July 2012 and asked them to switch everything into money market funds right now, and then switch it back into investments a little at a time over the 6 months to December 2012 (basically, averaging 50% out of the markets for the next 6 months)? I suspect not, but maybe you would.

I'm right in the middle of a transfer of an old pension to a SIPP right now. As it happens I'll be retaining 5% of it in cash on day one, but this is part of a specific intention to keep watching a couple of stocks in the share part of the portfolio with a view to deploying it a bit later. But the portion destined to go into ETFs, ITs or funds, and some individual shares, will be going in straight away. I'm 'taking the gamble' to put that money in now rather than later, as I think broadly a rise over the next 6 months is more likely than a fall.

The cash components of pension wrappers rarely achieve decent interest, so if you really want some time out before going back into equities or whatever your riskier assets are going to be, consider some fixed income or lower risk funds, rather than taking a complete break via cash.

jamesd

Have you taken the money out of the funds in the current pension? If the answer is no, then you've already decided that you are comfortable having the money invested, because it still is.

srcandas

I've been transferring two PPs to a SIPP over he last 3 weeks. I'd go along in general with the above but I have retained 20% in cash until the autumn.

The only reason I hadn't considered doing it in my PP is that it would have been very expensive to do so. The freedom of the SIPP now lets me currently do it for nothing and in the future at very low cost. (Great feeling to be free of the pension companies )

But as bowlhead says you need a reason. I have one but I could be wrong - but that's investment for you