Investing Lump Sum From Transfer Into SIPP

Barking_Dogs

I've got several pension schemes dotted about all over the place and I want to bring them into a SIPP so that everything is in one place.

I've chosen a few funds based on my attitude to risk and financial goals etc but the question I have regards how/when to invest - i.e. do I allocate money to each fund right away and do it in a lump sum?  Or do I pay it in gradually.  The latter option doesn't seem a good one since I don't want a whole load of cash sitting idle in my account & also, my timescales are 5-10 years here so I need to get it working again.  Any advice would be most appreciated.

Linton

Generally, you can spend all your money on funds immediatey or leave it in cash for as long as you wish.

On this forum most people recommend that you buy the funds as soon as the money is available.  The reason being that generally over the long term prices rise and dividends are being paid.  Therefore on average the longer the time for whch you are invested the more money you make.  The downside is that you may worry about a crash soon after you bought your funds and then blame yourself for years to come for not waiting.  However you cannot predict whether such a crash will happen, most times it wont. Your choice.

If you do decide not to invest everything in one go I suggest you feed in a fixed amount each month  and dont try to guess whether then is a good time or not.  

One extra point: 5-10 years is rather a short time for an investment.  It may be sensible to be pretty cautious in choice of funds. If there is a good chance that it is 5 years rather than 10 I would probably leave the money in cash.

Albermarle

Statistically, investing in one lump sum gives a better result most of the time than drip feeding. However mentally it can feel stressful to invest like this in case the markets drop a lot soon after the investment. 
However in  your case the money is already invested now , so going to 100% invested in the SIPP, means effectively no change. 

Barking_Dogs

Albermarle said:

However in  your case the money is already invested now , so going to 100% invested in the SIPP, means effectively no change. 

Yes, I suppose that's the case so long as I invest it in similar funds

Barking_Dogs

Linton said:

One extra point: 5-10 years is rather a short time for an investment.  It may be sensible to be pretty cautious in choice of funds. If there is a good chance that it is 5 years rather than 10 I would probably leave the money in cash.

I'm one of those who hasn't paid enough attention to pension planning over the years so I need to take the risk, unfortunately.  I've also got £100k outstanding on my mortgage - can't hep wondering if it wouldn't be better throwing money at this instead of making large contributions to my pension every month.

Linton

Barking_Dogs said:

Linton said:

One extra point: 5-10 years is rather a short time for an investment.  It may be sensible to be pretty cautious in choice of funds. If there is a good chance that it is 5 years rather than 10 I would probably leave the money in cash.

I'm one of those who hasn't paid enough attention to pension planning over the years so I need to take the risk, unfortunately

If it is only going to be invested for 5-10 years then the returns could well be much less important than the base contributions.  So risking the latter to maximise the former could be a bad idea.

However if you are planning to retire in 5-10 years time and then steadily draw the money down over the rest of your life your timescales could actually be say 10-30 years for most of your pension pot.  You should not look at your retirement date as the end of your investment.

Albermarle

 I've also got £100k outstanding on my mortgage - can't hep wondering if it wouldn't be better throwing money at this instead of making large contributions to my pension every month.

This a very common question/dilemma posted on this forum. Although there many different answers/opinions, they can probably be summed up as follows.

If the mortgage causes you anxiety and/or your job is not secure, then pay it off.

If you have a reasonably high risk tolerance, have some knowledge of investing/pensions and there is a long timescale involved, then invest.

The usual outcome of any discussions is to do some of both.

QrizB

Barking_Dogs said:

I've also got £100k outstanding on my mortgage - can't hep wondering if it wouldn't be better throwing money at this instead of making large contributions to my pension every month.

Historically, investing in a mainstream fund has worksed out better than paying off a mortgage.

Although, having said that, I paid of my mortgage early!

See also Albermarle's short post on risk aversion here:

https://forums.moneysavingexpert.com/discussion/comment/79296690/#Comment_79296690

Barking_Dogs

QrizB said:

Barking_Dogs said:

I've also got £100k outstanding on my mortgage - can't hep wondering if it wouldn't be better throwing money at this instead of making large contributions to my pension every month.

Historically, investing in a mainstream fund has worksed out better than paying off a mortgage.

Although, having said that, I paid of my mortgage early!

See also Albermarle's short post on risk aversion here:

https://forums.moneysavingexpert.com/discussion/comment/79296690/#Comment_79296690

Talking of risk aversion, I was looking at the 1 year performance of the  lower risk Vanguard 20% equity fund vs the higher risk Vanguard 60% equity fund as I was thinking of parking a good chunk in the former.  I'm glad I didn't, it's down 10% compared to 6% on the higher risk fund.   

Audaxer

Barking_Dogs said:

I've got several pension schemes dotted about all over the place and I want to bring them into a SIPP so that everything is in one place.

I've chosen a few funds based on my attitude to risk and financial goals etc but the question I have regards how/when to invest - i.e. do I allocate money to each fund right away and do it in a lump sum?  Or do I pay it in gradually.  The latter option doesn't seem a good one since I don't want a whole load of cash sitting idle in my account & also, my timescales are 5-10 years here so I need to get it working again.  Any advice would be most appreciated.

If I was investing a large lump sum from cash savings, I would be wary of investing it all at once. However as you are transferring various pension schemes that are presumably already invested, I would probably want to reinvest the lot right away at a similar risk level, if you were happy with the risk level you were already invested at.

Albermarle

Barking_Dogs said:

QrizB said:

Barking_Dogs said:

I've also got £100k outstanding on my mortgage - can't hep wondering if it wouldn't be better throwing money at this instead of making large contributions to my pension every month.

Historically, investing in a mainstream fund has worksed out better than paying off a mortgage.

Although, having said that, I paid of my mortgage early!

See also Albermarle's short post on risk aversion here:

https://forums.moneysavingexpert.com/discussion/comment/79296690/#Comment_79296690

Talking of risk aversion, I was looking at the 1 year performance of the  lower risk Vanguard 20% equity fund vs the higher risk Vanguard 60% equity fund as I was thinking of parking a good chunk in the former.  I'm glad I didn't, it's down 10% compared to 6% on the higher risk fund.   

Yes , some of the investment results so far this year have been unusual, but largely expected.
Normally so called lower risk funds, have a higher % of bonds, both government and corporate bonds.
Typically bonds do not move around that much in price and only grow slowly in the long term, so a perfect balance for the more volatile equities market. However since the financial crash of 2008 bonds have grown significantly on the back of governments around the world pumping money into the markets and very low  interest rates. This has now started to unwind and bonds do not like inflation/increasing interest rates. What is not clear is if the process has largely run its course or not.
In any case for most people VLS20 was never really a good choice of investment, as the equity % is too low. Even VLS 40 is relatively lowish risk in the great scheme of things.