Can I park some money in cash until I decide where I wish to invest at a later date?

03 September 2021

Question by Tracy

I am considering transferring a pension from one provider to another to keep it all in one place until I retire. My question is, can I park the money in say cash until I decide where I wish to invest at a later date?


Answered by James Greenly

Hi Tracy

Thank you for your question.

You will almost certainly be able to invest your pension in a cash or a 'cash' like fund until you decide on your desired long-term investment strategy. I am assuming when you say "can I park the money in cash", you mean within the pension wrapper itself. Be aware that if you withdraw from a pension wrapper, you will almost certainly suffer income tax, and will not be able to invest the whole amount back into the pension.

On the new pension providers website they will publish a list of all available funds. It will be a case of going through that list and identifying the cash fund(s) that you could invest in. Each fund has a document called a 'Key Investor Information Document' that will explain to you what the fund invests in, the risk level, as well as the charges etc.

If pure GBP cash is not an option, then be aware that these 'cash' like funds typically invest in very short dated bonds (loans to companies and governments), which do carry risks that pure cash does not.

Make sure you're entirely comfortable with the fund you've chosen, both when selecting the temporary 'cash' fund and for any future, longer-term investment strategy.

One final piece of advice - try and not leave your pension in cash for too long as inflation will be eating into the real purchasing power of your money. History tells us that a successful investment outcome is often down to 'time in' the market, rather than 'timing'.

Best wishes

James

Answered by

James Greenly

Chartered Financial Planner

I am a Chartered Financial Planner at Capital Asset Management, a boutique financial planning and wealth management firm based in the City of London.