Help investing money stuck in a pension?

Spiritguide21 · 18 August 2019 at 11:26AM

Ultimately I know I need to find a decent financial advisor, and will start that arduous journey soon, but thought I’d ask here first.

I have about £35k sitting in a private pension not doing much. I don’t contribute to that pension, I have another one in my (secure) job, and am in a fairly comfortable position generally.

The £35k is increasing slowly but I’d like to do a bit more with it. I can afford to lose it, but of course would prefer not to, so am happy to be a bit adventurous.

Any suggestions on what my options are? I guess the money has to stay in a pension but can be moved to a different one. Should I just bite the bullet and pay for an IFA and if so, how the he’ll do I go about finding one that knows his stuff and will work money magic?!

Linton · 18 August 2019 at 11:59AM

Pensions are just containers for investments. It is the investments that do well or not. Can you change what the pension is invested in?

If the pension has no special guarantees or benefits it is easy to move and does not require an IFA. All you need do is find somewhere you want the money moved to and ask your chosen provider to arrange the transfer. The easiest and cheapest transfer could be to your current employers scheme.

The more difficult question is deciding what investments you want to use, which is another reason for suggesting your current employers scheme. As its such a small amount and you dont seem much bothered anyway it may not be worth spending money on advice but just use the same investments.

Spiritguide21 · 18 August 2019 at 12:18PM

Thanks for the reply. I’m pretty sure I can transfer the balance so moving to current scheme would be an option, but my thought process was that the standard pensions are pretty low risk / low return.

As this particular fund is ‘spare’ money I was thinking more along the lines of investing in something that potentially could yield higher returns, but would need guidance on that, hence seeking advice.

SonOf · 18 August 2019 at 12:56PM

but my thought process was that the standard pensions are pretty low risk / low return.

Pensions dont have any returns. It is the funds you invest in that have the returns. Whilst some pensions have 30,000 options to invest in. Some only have 20. However, most pensions will cater for most or all of the risk scale.

newatc · 18 August 2019 at 12:58PM

I'm not an expert but with that amount and your returns requirement I would suggest you consider moving to an Hargreaves Landsdown SIPP and choosing a diversified tracker fund from the likes of L&G, HSBC , Vanguard.

SonOf · 18 August 2019 at 1:05PM

newatc wrote: »

I'm not an expert but with that amount and your returns requirement I would suggest you consider moving to an Hargreaves Landsdown SIPP and choosing a diversified tracker fund from the likes of L&G, HSBC , Vanguard.

Investing in a single tracker is bad quality investing unless its 100% equity global, including UK, tracker.

For smaller investors its usually better to stick to multi-asset funds rather than single sector funds.

Linton · 18 August 2019 at 1:49PM

Spiritguide21 wrote: »

Thanks for the reply. I’m pretty sure I can transfer the balance so moving to current scheme would be an option, but my thought process was that the standard pensions are pretty low risk / low return.

As this particular fund is ‘spare’ money I was thinking more along the lines of investing in something that potentially could yield higher returns, but would need guidance on that, hence seeking advice.

What level of risk are you prepared to accept? I am basically talking about short/medium term volatility rather than the risk of losing everything.

For example.

100% Equity global fund: average returns say 12% average return/year over past 10 years with 50% fall in a serious crash? Pad it out with bonds or similar to proportionately reduce % max fall and returns.

Set of higher risk niche funds - eg tech, small companies - say 17% average return/year over the past 10 years with 60% fall possibility?
Or something less volatile?

Note that the past 10 years have been unusually good with no major crashes as the world recovered from the 2008 crash.

Albermarle · 18 August 2019 at 2:04PM

thought process was that the standard pensions are pretty low risk / low return.

Have you actually investigated what the money in this pension is invested in ?
If you did not give any specific instructions when the pension was started , it is most likely your money will be invested in the default fund, typically at a medium risk/growth level .
There will be other funds available within the pension and at any time you could have asked to be moved to a higher risk level fund with the potential of higher returns . The problem is probably not the pension itself, but that you have not been actively managing it .
The same will apply to your current pension - if you have not actively chosen a fund(s) the money from your salary will be going into their default fund ( so same situation)

So you can move the £35K to your current pension but you will need to start actively managing the investments within the pension if you want to aim for higher long term growth. . Usually with a modern pension it can be done on line and your employer /current pension provider should have provided you with a username/password etc .

kinger101 · 18 August 2019 at 2:14PM

Spiritguide21 wrote: »

Thanks for the reply. I’m pretty sure I can transfer the balance so moving to current scheme would be an option, but my thought process was that the standard pensions are pretty low risk / low return.

As this particular fund is ‘spare’ money I was thinking more along the lines of investing in something that potentially could yield higher returns, but would need guidance on that, hence seeking advice.

You might be able to transfer it, but you should probably work out what the fees are where it is now, and what the fees are where you intend to transfer it.

I'm not sure what you mean by "standard pensions". Perhaps the default funds selected by employers. Yes, these will generally be lower end of the risk scale.

I'm not sure the "spare money" attitude is the right one to take. It's fine going for higher risk, particularly over a longer term. But there's no point being wreckless. Make sure your higher risk is spread over a number of geographies and sectors. A 100% global equities tracker might be an option for a significant chunk of the money.

DrSyn · 18 August 2019 at 2:44PM

Maybe something like this might be of interest to you :-

Target Retirement Funds

https://www.vanguard.co.uk/adviser/adv/investments/about-funds/target-retirement-funds

https://www.youtube.com/watch?v=Sr-IFxRGT88

Thrugelmir · 18 August 2019 at 4:06PM

Spiritguide21 wrote: »

The £35k is increasing slowly but I’d like to do a bit more with it. I can afford to lose it, but of course would prefer not to, so am happy to be a bit adventurous.

Not a huge amount of money. Returns are unlikely therefore to be earth shattering. Slow and steady growth over the long term is perfectly fine. Compounding returns are the key, i.e. reinvestment of income.

Help investing money stuck in a pension?

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