Changing default pension fund into 100% equity fund - do it now or wait?

tel_

My workplace pension money has been sitting in the default fund for over 10 years, and I've decided to move it into an active global equities fund. Question is, with the stock markets being in a so-called 'bubble' at the moment, and the rumour of a correction possible this year. Am I wise to hold off switching my fund into a global equities one for the time being?

Whilst I understand the volatility of an global equity fund (and I wasn't concerned when my S&S ISA value dropped last year in 100% equities due to C-19), the monies built-up in my pension would likely suffer a lesser drop left as they are for the time being, if a correction does occur.

So, 'swap funds now ('after all, you can't time the market, who's to say the correction will happen this year?)', or: 'what's the rush? They've been in the default fund for 10+ years, another year for the time being won't make a huge difference whilst be are in this unprecedented situation'.

I'm not due to retire for at least another 20 years, hence the 'when' to change funds, not 'if' I should change funds.

As always, it will be interesting to read your views  .

TVAS

How can we make a suggestion if you haven't described the make up of the default fund? Help us to help you.

Thrugelmir

Not all "markets" are in bubble territory.  Diversification is a key element in building a portfolio. Tracking one index alone isn't the way to achieve this. 

jamjar92

If the potential drop worries you, you may be more comfortable with fund with more bonds in it.

However you say you have 20 years to go, you are definately in the growth stage of the pension just ride it out.

I have less time than you go, and are still in growth stage, not thinking about adjusting anything  in fund types as I am happy with the risk levels selected across the funds I have selected.

Albermarle

A pragmatic solution could be to move some of it now and then review in 6 months .

tel_

TVAS said:

How can we make a suggestion if you haven't described the make up of the default fund? Help us to help you.

Default Fund:

International Equities  59%
International Bonds  19%
Property  6%
Managed Funds 10%
UK Equities  2%
UK Corp Bonds 2%
Other  2%
Risk rating : 4

Global Equities Fund:

North America  62%
Dev Europe  15% 
Japan 8%
UK 5%
Dev Asia (ex Japan) 4%
Alternative - trad. strategies  2%
Other  4%
Risk rating : 6

MK62

You could always morph from the default fund to the equities fund over a period..........a lot of ways to do that of course depending on how quick you want to complete it.......10% pm over 9 months for instance.
No way to know beforehand whether you'd be better off doing it this way,  but if its an equity crash you fear it might mitigate the effects a bit if a crash happens during the conversion window.

NedS

There's normally a dip/correction in every 12 month period. Assuming you are young (and 100% equities is the right place for you to be) I'd start transferring over the next 12 month as MK62 suggests, and go all in if there is a significant market dip / correction happy in the knowledge you've paid a cheaper price than now. Job done.

cfw1994

tel_ said:

My workplace pension money has been sitting in the default fund for over 10 years, and I've decided to move it into an active global equities fund. Question is, with the stock markets being in a so-called 'bubble' at the moment, and the rumour of a correction possible this year. Am I wise to hold off switching my fund into a global equities one for the time being?

Whilst I understand the volatility of an global equity fund (and I wasn't concerned when my S&S ISA value dropped last year in 100% equities due to C-19), the monies built-up in my pension would likely suffer a lesser drop left as they are for the time being, if a correction does occur.

So, 'swap funds now ('after all, you can't time the market, who's to say the correction will happen this year?)', or: 'what's the rush? They've been in the default fund for 10+ years, another year for the time being won't make a huge difference whilst be are in this unprecedented situation'.

I'm not due to retire for at least another 20 years, hence the 'when' to change funds, not 'if' I should change funds.

As always, it will be interesting to read your views  .

Have you compared fund sheets for the two options - how they have performed over 1/3/5/10 years?
I suspect you are right to consider changing - is it an "all or nothing" task, or could you switch (for example) 20% for each of the next 6 months?   That would be my personal preference, but no-one here has a crystal ball to know if that will work for you or not!

Thrugelmir

cfw1994 said:

tel_ said:

My workplace pension money has been sitting in the default fund for over 10 years, and I've decided to move it into an active global equities fund. Question is, with the stock markets being in a so-called 'bubble' at the moment, and the rumour of a correction possible this year. Am I wise to hold off switching my fund into a global equities one for the time being?

Whilst I understand the volatility of an global equity fund (and I wasn't concerned when my S&S ISA value dropped last year in 100% equities due to C-19), the monies built-up in my pension would likely suffer a lesser drop left as they are for the time being, if a correction does occur.

So, 'swap funds now ('after all, you can't time the market, who's to say the correction will happen this year?)', or: 'what's the rush? They've been in the default fund for 10+ years, another year for the time being won't make a huge difference whilst be are in this unprecedented situation'.

I'm not due to retire for at least another 20 years, hence the 'when' to change funds, not 'if' I should change funds.

As always, it will be interesting to read your views  .

Have you compared fund sheets for the two options - how they have performed over 1/3/5/10 years?

The 62% weighting to North America has a very obvious outcome when using hindsight.  Will the same market conditions prevail going forward? 

tel_

MK62 said:

You could always morph from the default fund to the equities fund over a period..........a lot of ways to do that of course depending on how quick you want to complete it.......10% pm over 9 months for instance.
No way to know beforehand whether you'd be better off doing it this way,  but if its an equity crash you fear it might mitigate the effects a bit if a crash happens during the conversion window.

NedS said:

There's normally a dip/correction in every 12 month period. Assuming you are young (and 100% equities is the right place for you to be) I'd start transferring over the next 12 month as MK62 suggests, and go all in if there is a significant market dip / correction happy in the knowledge you've paid a cheaper price than now. Job done.

What you both suggest is a fantastic idea.

My company/pension provider allows us to select percentages of a particular fund and change it. We are not charged a switching fee either, so doing this 10% or 20% at a time over 12 months sounds like the best solution.

Cheers for the idea!