Mitigating Pension transfer timing issues.

green_man

In the next six months or so I will be transferring 2/3 of my work DC pot to (probably) a Halifax SIPP to allow me to start drawdown from next January (when I’m 55).  This pot is currently 90% in a mutli asset fund (similar to VLS60). I will be investing in 70% HSBC Global Strategy Balanced, 20% Cash, 10% Small Companies/EM.

i am assuming the transfer will take 1-2 months (ish) to complete and could leave me out of the market in this period. This was little concern to me when the markets were flying high as any large movements would be more likely in my favour (ie. down).  But with the current ongoing correction this might change the equation somewhat.

So... what if the correction continues and we see say a 30% drop, should I be taking any action now that might mitigate the possibility of a sudden large uplift whist I’m out of the market? Obviously with Coronavirus sentiment could well shift quickly (as this week) and could lead to large movements until some stability has been reached.  It is likely that by the summer infection spread will be better understood and so maybe more stable, so I might be have nothing to worry about.

Any thoughts/ideas/suggestions?

Note - the current drops would normally have no concern to me whatsoever.

Andrew31

Should not leave you out of the market that long.   If you are derisking in 6 months, means you are in higher risk for the short term, which isn't great news.      

Why are you changing investment strat, why not put a period of income in cash and continue to invest at your desired risk level.   
If your desired risk level is lower than you are now, why are you invested higher?

could phase the switch within your current plan, might mitigate some market movements, but selling now isn't that bright, you should have done it 2 weeks ago!!

green_man

Andrew31 said:

Should not leave you out of the market that long.   If you are derisking in 6 months, means you are in higher risk for the short term, which isn't great news.      

Why are you changing investment strat, why not put a period of income in cash and continue to invest at your desired risk level.   
If your desired risk level is lower than you are now, why are you invested higher?

could phase the switch within your current plan, might mitigate some market movements, but selling now isn't that bright, you should have done it 2 weeks ago!!

Hi, sorry, I’ve probably not been clear.  

My strategy isn’t changing it’s just my work pension doesn’t support drawdown so I need to transfer somewhere that does.  The investments in the target platform (Halifax) will be broadly similar to what my current work platform contains.  So the concern is just really about the time out of the market and possibility of large swings (in particular up) in that period.

Albermarle

If you transfer in cash, and both providers are on the Origo service , it can be a lot quicker than you think, although it is not guaranteed.
It is likely that by the summer infection spread will be better understood and so maybe more stable,
Apparently it is normal that these types of epidemics subside when the weather improves , although they often return the following winter .

dunstonh

i am assuming the transfer will take 1-2 months (ish) to complete and could leave me out of the market in this period.
About 3-5 days out of market is the norm.

Andrew31

green_man said:

Andrew31 said:

Should not leave you out of the market that long.   If you are derisking in 6 months, means you are in higher risk for the short term, which isn't great news.      

Why are you changing investment strat, why not put a period of income in cash and continue to invest at your desired risk level.   
If your desired risk level is lower than you are now, why are you invested higher?

could phase the switch within your current plan, might mitigate some market movements, but selling now isn't that bright, you should have done it 2 weeks ago!!

Hi, sorry, I’ve probably not been clear.  

My strategy isn’t changing it’s just my work pension doesn’t support drawdown so I need to transfer somewhere that does.  The investments in the target platform (Halifax) will be broadly similar to what my current work platform contains.  So the concern is just really about the time out of the market and possibility of large swings (in particular up) in that period.

Then if not changing risk, you should only be out the market for a few days, and not much you can do about it, unless the companies involved can in specie assets. 

green_man

Thanks for the responses.  If I do end up being out of market for a week or less then I am certainly not going to concern myself.   I have spoken to my companies pension department who confirmed that any transfer would be done in cash and units would be sold prior to the cash being transferred to the other provider.  So I will leave things for now, hopefully I can look for a relatively benign period sometime in the summer to go ahead with the transfer.

Notepad_Phil

As others have said, you'll probably only be out of the market for a few days to a week, but depending on how much you're transferring, have you thought of possibly doing the transfer in multiple stages to lessen the potential negatives from selling your 2/3rds at a low and then having to buy high?

You might of course still lose out, but I did a similar transfer in multiple stages and the average sell/buy price evened out the individual wins and losses. If I could have guaranteed that I'd sell high and then buy back in a few days time at a lower price then I'd have done it in one stage, but with some of the big market moves that I've seen (up and down, and sometimes back just as quickly) then I felt it more prudent to average them out. It might only be a percentage or two, but why risk it when you can mitigate it.

It would take longer to get all the funds across, but you say that the drawdown isn't starting till next January so there's plenty of time to do the transfers.

green_man

Notepad_Phil said:

As others have said, you'll probably only be out of the market for a few days to a week, but depending on how much you're transferring, have you thought of possibly doing the transfer in multiple stages to lessen the potential negatives from selling your 2/3rds at a low and then having to buy high?

You might of course still lose out, but I did a similar transfer in multiple stages and the average sell/buy price evened out the individual wins and losses. If I could have guaranteed that I'd sell high and then buy back in a few days time at a lower price then I'd have done it in one stage, but with some of the big market moves that I've seen (up and down, and sometimes back just as quickly) then I felt it more prudent to average them out. It might only be a percentage or two, but why risk it when you can mitigate it.

It would take longer to get all the funds across, but you say that the drawdown isn't starting till next January so there's plenty of time to do the transfers.

Thanks for the suggestion, but, unfortunately a multi stage transfer is not possible as my work will only transfer everything at once (in fact they will split, but the only options are AVC funds  or everything, this transfer is my AVC funds which constitutes about 2/3 of the full pot), in addition Halifax charge a transfer in fee so that would also skew the equation. 

Thrugelmir

Only risk what you can afford to lose. Position your portfolio accordingly.  When share prices fall from peaks. Recovery in market  indices takes a lot lot longer. 

MK62

Albermarle said:

If you transfer in cash, and both providers are on the Origo service , it can be a lot quicker than you think, although it is not guaranteed.
It is likely that by the summer infection spread will be better understood and so maybe more stable,
Apparently it is normal that these types of epidemics subside when the weather improves , although they often return the following winter .

Though the weather will only be improving for us in the Northern hemisphere......