When I request my pension fund to be disinvested how do I ensure the timing is of my choosing?
07 April 2021
Question by Patrick
I am a retiree and my Direct contribution fund is still with the Company. When I request the fund to be disinvested, (to transfer to a SIPP and take 25%PCLS) how do I ensure it is at a time of my choosing. I don't want to make the request to switch my fund and then have a two week delay before disinvestment during which time the market bombs and my PCLS is ruined.
Answered by Kenny Stevenson
I appreciate your concerns on this front but market timing cannot be guaranteed. If you are concerned about that happening at the exact point of your retirement and taking of PCLS as a lump sum then consider moving to cash ahead of time. There may well be market fluctuations but unless the portfolio is fully in equities then a drop in the markets will not affect all parts of the portfolio. You should make decision about the makeup of the portfolio over time and ahead of the decision to take the PCLS.
Other things to note are that when you are transferring a SIPP, you can do this without crystalising the PCLS at that exact moment so if by chance the market has dropped heavily in that period you do not need to take the full PCLS then if you do not need to do so; again making decision ahead of the actual time to take it will help.
You can also consider in specie transfers of investments to the new wrapper so the funds are not out of the market. And finally, as long as the pension will allow it you do not need to take your PCLS in one go now anyway. If you have a specific need for the lump sum it does make sense but feeding out your PCLS as part of flexi access drawdown can also actually help to increase the monetary value of the 25% PCLS.
Kenny is a Chartered Financial planner and Fellow of The Personal Finance society. He started his career in 2008 in the middle of the Financial Crisis – a baptism of fire some might say but a good experience. He advises a broad range of people; from private clients to business owners and has guided many clients through the journey to retirement. He received the Insurance Society of Edinburgh Award for highest exam grade in Edinburgh at both Diploma and Advanced Diploma levels.