Lump Sum payment into SIPP

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Johnny_Doe
Johnny_Doe Posts: 296 Forumite
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in Pensions, annuities & retirement planning
Hi all,

I'm looking to pay £10k into a Best Invest SIPP to gain the tax relief but would like to invest it into a relatively safe fund. I'm concerned if I buy equities this could potentially drop 30-40% in the coming months, although I know it will recover..

I realise this is a very broad question but could someone please advise on a defensive fund with low charges that would be suitable? I've had a look and the best cash funds appear to only pay 0.3% and charge 0.3%..

Cheers
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  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    This no reason why you can't hold as cash apart from the lack of interest or earnings.

    Any fund investment will hold some risk, and the risk/ reward relationship has become very skewed to no return at the lower end, or negative if you cosmiderincomsidering inflation is real terms.

    What sort of timescale are you looking at for the pension?
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    I'd sit in cash if I were you, but you could consider Ruffer Investment Company for half and Personal Assets Trust for the other half.
    Free the dunston one next time too.
  • Johnny_Doe
    Johnny_Doe Posts: 296 Forumite
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    Thanks for the advice, looking to retire in 10 yrs, 75% will still be invested but will take an income from drawdown at 55.

    I think you're right keep it as cash, the £2500 is a handy addition to the pension even though it's not earning any interest.

    Funnily enough if I did invest the £10k in something that returned 4% (ie p2p) it would take 5-6 yrs to grow to £12500.. food for thought
  • coyrls
    coyrls Posts: 2,432 Forumite
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    Johnny_Doe wrote: »
    Thanks for the advice, looking to retire in 10 yrs, 75% will still be invested but will take an income from drawdown at 55.

    I think you're right keep it as cash, the £2500 is a handy addition to the pension even though it's not earning any interest.

    Funnily enough if I did invest the £10k in something that returned 4% (ie p2p) it would take 5-6 yrs to grow to £12500.. food for thought

    Yes but after 10 years @ 4% you would have £14,800 vs £12,500, which might indicate that over a 10 year time frame, you should consider some sort of conservative investment because £12,500 @ 4% over ten years would give you £18,500.
  • Johnny_Doe
    Johnny_Doe Posts: 296 Forumite
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    Exactly, I didn't say anywhere I wasn't going to invest for the entire 10yrs, but I would expect markets to have settled down in 5-6 yrs (hopefully earlier!)
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    You think you can forecast the markets 5 years out!?
  • davieg11
    davieg11 Posts: 278 Forumite
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    Some people have been sitting on cash since 2013 waiting for a crash....
  • Johnny_Doe
    Johnny_Doe Posts: 296 Forumite
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    Anotherjoe, what do you suggest then?
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    Johnny_Doe wrote: »
    Anotherjoe, what do you suggest then?

    Cash, with a guaranteed loss to inflation, ruffer or pat as kidMugsy suggests with a lower risk to take your chances with the markets, those are the main options.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    Johnny_Doe wrote: »
    Anotherjoe, what do you suggest then?

    If you are looking to drawdown at age 55 then you potentially have another 30+ years of being invested so I wouldn't even be particularly cautious and certainly wouldn't be getting out if the market.

    However, assuming very cautious is your nature then whilst I am not aware of those two investments mentioned presume they fit your risk profile so go for those or some other low risk investment, not cash. It's not the "old" model when you went very cautious and finally into cash at retirement because you bought an annuity.

    You have ten years to recover from a crash, the flexibility to retire a year or two later if it all goes horribly wrong , and the possibility that being in the market instead if in cash will enable you to either retire at 55 with more confidence (since you'll have more money than with cash) or best case, retire earlier than planned.

    I am practicing what I preach (doesn't mean I am right of course :D ) and am retiring this year and my only adjustment has been to move towards more passive funds than active,and more investments aimed at income than growth, rather than getting out of the market, I'm just as invested as I was five years ago. I'll be invested another 30 years or so and the growth over that period will aid my spending, being all in cash would significantly lower my long term spending.
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