Is it time to invest pension cash?

RocketRod

Recently I transferred around £80,000 from an old FSAVC with Aviva into one of their plans in order to take the 25% TFLS - and now I'm left with the remaining crystallised £60,000 in cash to invest.
Now that the Referendum vote is out of the way, I'm confused over what's the best way forward. I'll be 62 this year and recently took voluntary redundancy.
I'm probably looking to leave the £60,000 invested for at least five years and I'm considering putting it into one of Aviva's ready-made multi-asset growth funds for future flexible pension drawdown.
My first question is should I now move the cash into a fund or with all the turmoil surrounding Brexit wait a little longer?
Secondly, are there better areas/companies other than Aviva to transfer the cash with low to medium risk during my retirement?
Many thanks

AnotherJoe

Do you have any other cash? Because you should have some. This is a good time to invest (IMO) I'll be buying tomorrow, but you also need some cash as a buffer, so if this is all your pension then that's not a good idea, especially if you'll be drawing down over 5 years.

Bottom line, need to see the whole picture.

FWIW if I was buying funds I'd be looking at low cost like Vanguard, not a multi manager find, I nearly made that mistake myself last year., basically you've got charges on top of charges, reducing your gains.

jamesd

It's a poor time to be investing in equities in the UK or US because the cyclically adjusted price/earnings ratio is well above the historic average. Shiller's work has shown that above average cyclically adjusted P/E is linked to lower future investment returns. Tracker funds like those from Vanguard are a particularly poor buy at times like this because they will just follow the markets down.

The recent brexit drops have not substantially changed this picture, they haven't been substantial enough. However, if they continue and there's a drop of at least 20% and even better up to 40% then it would become a relatively good time to buy.

In the meantime I'm doing things like P2P investing, which is decoupled pretty thoroughly from the stock markets but can pay quite significant levels of interest, perhaps 10%+ even after potential bad debt losses being available. Equities can be a great buy and I'm very keen on them but that doesn't mean I'll ignore values when they are uncommonly high.

RocketRod

Thanks AnotherJoe and jamesd. I should add that I'm looking to start a final salary pension of around £25,000 a year in about 18 months, so it's just really just a case of what's best to do with the £60,000 I have sitting in an Aviva cash account earning very little interest?
My redundancy and savings should keep me ticking over until I take my company pension, but I'm concerned whether now is the right time to move the £60,000 following brexit?
Incidentally, would I have to withdraw and pay tax on the £60,000 if I wanted to invest in P2P?

kidmugsy

Invest it in gold about three weeks ago.

green_man

I partially agree with Jamesd, I don't think the drops from Brexit have been anything like as significant enough to consider investing if you weren't going to anyway. Of course there have been a few areas where there have been significant drops (some of the banks for example) and if you fancy these particular stocks than it could be a good time to get in.

Of course timing the Market is notoriously difficult and a bit of a fools game but I feel there will be more drops than we have so far seen.

Or you could try the P2P route as James suggests. I have had a look at P2P a couple of times and I have to admit I struggle to find the 10% returns that James talks about, and the 3-5% that looks frequently available I don't think represents good value.

bigadaj

green_man wrote: »

I partially agree with Jamesd, I don't think the drops from Brexit have been anything like as significant enough to consider investing if you weren't going to anyway. Of course there have been a few areas where there have been significant drops (some of the banks for example) and if you fancy these particular stocks than it could be a good time to get in.

Of course timing the Market is notoriously difficult and a bit of a fools game but I feel there will be more drops than we have so far seen.

Or you could try the P2P route as James suggests. I have had a look at P2P a couple of times and I have to admit I struggle to find the 10% returns that James talks about, and the 3-5% that looks frequently available I don't think represents good value.

P2p investing certainly has risks and these have to be acknowledged, together with the need for diversification across loans and platforms.

I'm invested in three currently, Moneything, Savingstream and Ablrate, all reasonably good so far. Loans are secured against assets, frequently property, and rates are generally 10-14%.

James and others have had concerns recently with Savingstream in the way they have handled a single defaulted loan issued before they changed their loan structure, so dyor research as ever and with those returns it shouldn't come as a great shock if you do get defaults, which with security means you will have your money tied up until assets can be sold, and you may only get a percentage of your investment back.

jamesd

green_man wrote: »

I have had a look at P2P a couple of times and I have to admit I struggle to find the 10% returns that James talks about, and the 3-5% that looks frequently available I don't think represents good value.

At the moment my new money is mostly going to investments offered by Ablrate and moneyThing, both of which normally have interest rates of about 12%, though they do vary a bit higher or lower. In both cases the loans are given against some sort of goods as security. That can be anything from art through to shipping containers being imported and on to buildings.

The concerns that have caused me to switch here to recommending against using SavingStream, and to at least defer my own plan to invest there, don't relate to the default. Those will happen. It's related to LTV valuation including planning permission that hadn't been granted and never was; them saying that the borrower was an individual developer (so personally liable) when it seems to have actually been a limited company that they took a 10% ownership interest in, them offering their own corporate guarantee then after default saying that terms and conditions mean there is no guarantee and a range of other factors. None of those cause me to be confident that I can rely on them to fully disclose all relevant facts about the investments being offered or to keep the risks the same after the investments have been made. I expect the default to result in full capital and interest recovery but that doesn't do anything to resolve the things that concern me.

jamesd

RocketRod wrote: »

I'm looking to start a final salary pension of around £25,000 a year in about 18 months

Is that at the normal retirement age for the scheme? If not, I'd usually suggest using other money to love on until its NRA because actuarial reductions for taking pensions early are often bad. Not all of them, though, so it does need to be checked for the specific scheme.

RocketRod wrote: »

it's just really just a case of what's best to do with the £60,000 I have sitting in an Aviva cash account earning very little interest?

If that's the money in a pension account just leave it uninvested for now. It's not the time for investment beginners with little future earning capacity from work to be investing significant lump sums. A little regular investing, but not the lot. This paragraph may change a few weeks from now, it's just about the current turmoil and significant prospect of much lower prices to buy at later, without sufficient gain prospect today to be worth taking the risk of suffering fro those drops.

RocketRod wrote: »

Incidentally, would I have to withdraw and pay tax on the £60,000 if I wanted to invest in P2P?

In practice, yes. The cheapest SIPP deal I know of which allows P2P involves annual charges of around £1,000 a year, pension pot size of at least £200,000 and enough experience to persuade the provider that you know what you're doing.