Transfer pension pot in this climate?

Rony

Hi all,

So I have like 3 pension pots from my 3 jobs dating back about 7 years. They are all DC pension pots and have no fees/charges to transfer.
I want to transfer all pots into my current one with my employer to streamline my pension.

My question is more about investments and whether it is a bad time to transfer? Currently the stocks market is at a huge low, so my brain is immediately thinking that if I transfer now,  the pensions companies would sell my investments at a low, crystallising my loss. However on the other hand, if the transfer takes place relatively quickly, then my current pension plan should buy in at these low rates, so I wouldn't really lose out in that respect right?

My assumption is that the pension plan I am transferring to uses the same fund investments as the others.

I'm pretty sure that is right, but I couldn't find anything on the internet. They mostly talk about stuff like exit charges and loss of rights to annuity etc. I just wanted to confirm with you guys quickly before I made the transfers, and that there are no reasons as to why I should hold out until the market has recovered. [The only thing I can think of is if my current pension plan is invested in investment funds that have not been affected by Covid, so I am selling at a low and then buying high - but this is not the case, I received my pension statement yesterday and my plan value has dropped by 20% lol]

Thank you,

dunstonh

Transfer pension pot in this climate?

The hot weather doesn't impact on pension transfers

My question is more about investments and whether it is a bad time to transfer? 

No.

Currently the stocks market is at a huge low,

They shouldn't be.   Most investors should be seeing their current values higher than in January or not far off, depending on their risk profile.   The markets are nowhere near the low point and many are higher than the pre-coronavirus point.

he pensions companies would sell my investments at a low, crystallising my loss. 

The low was around 23rd March.   over 3 months ago.   The providers would not back date to then.

Albermarle

 I received my pension statement yesterday and my plan value has dropped by 20% lol]

You will probably find the date the valuation was made was some time ago . With a few blips the markets have been steadily improving for the last 3 months .  One caveat to this if your pension is 100% invested in equity ( so high risk ) it will still be showing a significant loss ( not 20% though) . More balanced pension funds have largely recovered.

My assumption is that the pension plan I am transferring to uses the same fund investments as the others.

You can not make that assumption , most likely you will have to transfer at least one or two of the pensions in cash .

This can mean that markets can move during the transfer but it is 50:50 whether that works for or against you.

Rony

@dunstonh

Yes I forgot that the statement I received yesterday is to 31 March 2020 so that makes sense.

Thank you,

@Albermarle

Yes I forgot that it was dated a while back.

Also I was stating my assumptions attached to the theory that I was making rather than an assumption as to reality, meaning that was the base on which we could have built different scenarios (a control in a way, if that makes sense haha). That is why I mentioned at the end about funds being different as an expansion to my theory.

And okay that risk of 50:50 would happen whether the market is bad or good, so in regards to my question it doesn't matter whether I transfer when the market is weak or strong.

Thank you both, I will set up to transfer soon!

Paul_Herring

My question is more about investments and whether it is a bad time to transfer? Currently the stocks market is at a huge low, so my brain is immediately thinking that if I transfer now,  the pensions companies would sell my investments at a low, crystallising my loss.

But they're not being crystallised if you're transferring.

Whether the stocks are high or low for a transfer shouldn't matter; theoretically they should be being bought the receiving side a the same price they were sold at the sending side. (Presuming an in-specie transfer isn't possible.)

What may matter, however, is the practical version of that theory if the markets are volatile, and how long there'll be between selling and buying between the two companies.

So price shouldn't be your worry - volatility should.

Marcon

Having all your eggs in one basket doesn't necessarily streamline things, although it certainly makes it easier to keep track of them.

Before you go any further, you might find it helpful to read this and just consider if any of the points apply to you: https://www.express.co.uk/finance/personalfinance/1171833/pension-calculator-contributions-pots-consolidate-my-uk-news

AnotherJoe

Rony, you arent thinking clearly.

Lets say, for sake of argument, that you sell your current investments at a 20% price below highest.

When you come to buy, you'll be buying at 20% below what the prices were as well ! 

So with one exception it makes no difference, its the same as selling an investment in your current fund and buying a different one.

The exception is, time out of the market. You might sell at a low and prices rise in the time it takes to transfer. Of course, the opposite can happen, you could sell and by the time it comes to buy prices fell another 10%.

But all of that has got nothing to do with "crystallizing a loss" as if you lost money. You didnt.

This assumes you cannot have the same investments in the two places. If you can you simply tell them to transfer and theres no delay. Most likely you'll find its not possible, so sell up and transfer as cash is quickest.

Rony

@Paul_Herring
Well technically I have crystallised it, just for a brief moment in time in which you are right,  it is exposed to volatility. You have explained it much better than I did.

@Marcon
Thank you for that interesting read. Everything on that article I already knew about until I came to the small pot privileges at the bottom which I didn't know about. I need to do some research on this as I don't fully understand the details from that article, but it is enough to delay my merging of my pots. Thank you!

@AnotherJoe

Yes I understand, I have worded my original post slightly bad. I understand the concept that it is just a transfer. It's just a matter of what funds it it transferring from and to which funds, and as another poster mentioned above, I need to take into account the volatility in the market. However if the transfer is fairly quick (I have no experience of this) then I can be confident that it will not have any material impact on my position.

Thanks!

Prism

Before you decide I would try and get online access to your existing pension funds. Most modern platforms should allow this. Then you would be able to check current value rather than working from an out of date statement.

Albermarle

 However if the transfer is fairly quick

For a cash transfer it largely seems to depend if both parties are on the electronic transfer system or not .

In my limited experience 48 hours to three weeks , although your cash would not be out of the market more than a week at most.

dunstonh

@Paul_Herring
Well technically I have crystallised it, just for a brief moment in time in which you are right,  it is exposed to volatility. You have explained it much better than I did.

I think it was the term "crystallise" that confused.   That actually means something different with pensions.