Sipp transfer - cash or in specie ?

webbs123

I am a beneficiary of a AJ Bell SIPP from deceased family member,  and am looking to move this to a flexible drawdown pension (also with AJ Bell).
I am being offered either cash or in specie transfer, but seem to find conflicting advice on which is best.

Don't totally understand the difference, and have heard of long delays when choosing in specie option. But don't know of that would be the case as it's still AJ Bell.

Any advice greatly appreciated.

MallyGirl

generally, in specie can take a lot longer but you are never 'out of the market'. The downside is that while that longer transfer is in progress you cannot make any changes.

Malthusian

In-specie means the funds in the late relative's pension are moved directly into yours. Cash means the late relative's funds are sold, and the cash is moved into your pension, which you can reinvest.

Cash means you are out of the market, which means you will lose out if the markets go up - but equally you could gain if they go down (meaning you buy back in at lower prices). The expected / average loss from being out of the market during a cash transfer is slightly worse than nil, as over the usual timescale for a cash transfer, it is a coin flip's chance whether the markets go up or down. 

In-specie transfers generally take longer, which means it can take longer before you can withdraw money or switch the funds.

If you are more worried about being out of the market, go with in-specie. If you are more worried about not being able to access the money or having to spend a long time chasing AJ Bell until every last fund appears, go with cash.

Steve_666_

If you intend to sell the assets and reinvest into alternates, then cash would be the better option, if these are considered long term hold, then in species provides the same result and likely save on costs.

midlandsimon

As it is going from AJ Bell to Aj Bell internally should be as fast as a cash transfer! Shouldn't be an issue

Albermarle

midlandsimon said:

As it is going from AJ Bell to Aj Bell internally should be as fast as a cash transfer! Shouldn't be an issue

The investments in the SIPP have to be re registered to the new owner. This can take time and the speed is mainly out of control of the SIPP provider.

dunstonh

However, same platform in-specie transfers do tend to be quicker than different platform in-specie transfers.

webbs123

Cash means you are out of the market, which means you will lose out if the markets go up - but equally you could gain if they go down (meaning you buy back in at lower prices). The expected / average loss from being out of the market during a cash transfer is slightly worse than nil, as over the usual timescale for a cash transfer, it is a coin flip's chance whether the markets go up or down. 

Thanks all for the input.   If transferred to flexi drawdowen pension as cash, does that mean it stays as cash, ie. isn't subject to any market changes and keeps same value (minus any charges) ?

dunstonh

webbs123 said:

Cash means you are out of the market, which means you will lose out if the markets go up - but equally you could gain if they go down (meaning you buy back in at lower prices). The expected / average loss from being out of the market during a cash transfer is slightly worse than nil, as over the usual timescale for a cash transfer, it is a coin flip's chance whether the markets go up or down. 

Thanks all for the input.   If transferred to flexi drawdowen pension as cash, does that mean it stays as cash, ie. isn't subject to any market changes and keeps same value (minus any charges) ?

Yes, that is the negative if you fail to select investments it should be moved into

Albermarle

webbs123 said:

Cash means you are out of the market, which means you will lose out if the markets go up - but equally you could gain if they go down (meaning you buy back in at lower prices). The expected / average loss from being out of the market during a cash transfer is slightly worse than nil, as over the usual timescale for a cash transfer, it is a coin flip's chance whether the markets go up or down. 

Thanks all for the input.   If transferred to flexi drawdowen pension as cash, does that mean it stays as cash, ie. isn't subject to any market changes and keeps same value (minus any charges) ?

Currently most providers are paying interest on cash balances.
However in the long run cash will lose value due to inflation.
If you intend to withdraw the pot within a few years, then holding it as cash is fine. If you want the pension pot to be sustainable over 20 years, then it would be a very bad idea to hold it in cash rather than investing it, or most of it.