Pension Transfer. Time Out of Market.

barnstar2077

Imagine you are transferring one SIPP to another.  Clearly the whole process could take quite a varied amount of time.  Especially at the moment!

But what about the actual gap where you are not in the market?  The old SIPP provider sells your funds and turns them into cash.  This is then transferred to the new provider and your preselected funds are bought.  Roughly how long could you not have your money in the market for, and what would be the worst case scenario?

Is it possible to lose large sums of money during this process, or am I getting it all wrong?

Prism

I did this last summer. If I remember correctly it took over 3 weeks of being out of the market and I think I missed out on about a 3% gain. Slightly annoying but it could have gone the other way. Besides, 3% is nothing in the scheme of things.

I also used the opportunity to change my investments. I kept track of the original portfolio which is now underperforming my current one even with that 3% loss.

Dox

barnstar2077 said:

Imagine you are transferring one SIPP to another.  Clearly the whole process could take quite a varied amount of time.  Especially at the moment!

But what about the actual gap where you are not in the market?  The old SIPP provider sells your funds and turns them into cash.  This is then transferred to the new provider and your preselected funds are bought.  Roughly how long could you not have your money in the market for, and what would be the worst case scenario?

Is it possible to lose large sums of money during this process, or am I getting it all wrong?

If there's a sharp movement in the market you could 'lose' money, but unless you need to access it soon after the transfer, it's likely to go up again in an equally unpredictable manner.

Look on the website of your current provider and see what they say about timescales; ditto the receiving scheme. 

dunstonh

You can either do a cash transfer or an in-specie transfer.  The former is relatively quick but takes you out of the market for about a week.    The latter can be much much slower but you never leave the market as your investments are just registered at the new platform.

TBC15

It is what it is, get on with it.

My cash SIPP transfer from AJ Bell to Fidelity should have taken 5-10 working days. It took over 6 weeks. Do it, forget about it, and move on.

Thrugelmir

barnstar2077 said:

Is it possible to lose large sums of money during this process, or am I getting it all wrong?

Markets and currencies constantly move.  If you hold individual shares and liquidate them. There's two sets of dealing charges, possibly stamp duty or transaction charges , plus the share spread to be factored in.  As a result could be an expensive exercise. Choosing the provider at the outset should be given the same thought as where to invest. 

[Deleted User]

In kind transfer is the answer, like dunstonh said. Sometimes your assets don’t trade by the recipient broker. In that case you can sell the “offending” asset and buy the one that trades at both before the transfer. 

Having said this, its not a huge risk to transfer as cash. Say your expected return is 12% per year (optimistic).  A month out of the market loses you an average of 1%. Will be more or less but its not a huge deal in the context of decades we spend fully invested.  

barnstar2077

Thrugelmir said:

barnstar2077 said:

Is it possible to lose large sums of money during this process, or am I getting it all wrong?

Markets and currencies constantly move.  If you hold individual shares and liquidate them. There's two sets of dealing charges, possibly stamp duty or transaction charges , plus the share spread to be factored in.  As a result could be an expensive exercise. Choosing the provider at the outset should be given the same thought as where to invest. 

Although my example was about SIPPs, it is not that easy if you are transfering from a works pension though. 

Albermarle

barnstar2077 said:

Thrugelmir said:

barnstar2077 said:

Is it possible to lose large sums of money during this process, or am I getting it all wrong?

Markets and currencies constantly move.  If you hold individual shares and liquidate them. There's two sets of dealing charges, possibly stamp duty or transaction charges , plus the share spread to be factored in.  As a result could be an expensive exercise. Choosing the provider at the outset should be given the same thought as where to invest. 

Although my example was about SIPPs, it is not that easy if you are transfering from a works pension though. 

I have transferred four different times from current and ex employer DC funds with traditional pension providers, like Scottish widows , to a SIPP . So each one had to be in cash.
Two took 2.5 weeks 
One took two weeks and one took two days ( Aviva to Fidelity) 
However I was not out of the market the whole time and on average was less than a week.  

Alexland

Similar to ISAs the transfer time really depends on providers rather than if it's a DC workplace scheme versus a SIPP. My fastest partial transfer-out was from my old Fidelity Life workplace pension into my Fidelity Personal Investing SIPP which only took about 2 days including selling down the bespoke Fidelity Life fund. Other transfers have taken months for no obvious reason other than the provider(s) have a backlog of work and lack of motivation between steps. My preference is to do an in specie transfer where possible but with bespoke workplace funds it's not possible so there is the time out of the market risk during which it's almost 50/50 if you would gain or lose. Still it's worth the risk for the NI benefit of making all contributions via the workplace sal sac scheme.

Notepad_Phil

barnstar2077 said:

Thrugelmir said:

barnstar2077 said:

Is it possible to lose large sums of money during this process, or am I getting it all wrong?

Markets and currencies constantly move.  If you hold individual shares and liquidate them. There's two sets of dealing charges, possibly stamp duty or transaction charges , plus the share spread to be factored in.  As a result could be an expensive exercise. Choosing the provider at the outset should be given the same thought as where to invest. 

Although my example was about SIPPs, it is not that easy if you are transfering from a works pension though. 

If the works pension is a DC type then you can check to see whether you can do the transfer in multiple segments. That's how I did a transfer from my Aviva DC pension to my SIPP - it took a bit longer to get everything through, but markets can sometimes move very quickly and so I was quite happy to average out the wins and losses from multiple transfers.