How to get the cash out of your Pension

snow hope · Post by **snow hope** » 26 Feb 2007, 23:29

Thanks for the info Jules. I found that Sipps were prohibatively expensive too. You really need quite a decent sized pot to be able to start one and then the annual running charges eat considerably more into your annual profits than normal style pensions.

I still think bonds may be the most secure route to mitigate market and currency crashes.

The problem comes with inflation though. I belive Bonds are very secure but in turn have low returns - inflation comletely wrecks them in only a few years.....

Some other people must be having these thoughts and issues? Anybody else get better plans to cope on the pension side?

Post by **kenneal - lagger** » 27 Feb 2007, 04:05

I've diverted my money from my pension into an ISA so that I can buy PV panels when I've got enough cash.

snow hope · Post by **snow hope** » 27 Feb 2007, 22:38

Got an update from my company pension advisor (at last) :-

"In a falling equity market, the fund types that do best are those invested in fixed interest stocks such as Gilts, Corporate Bonds, Index Linked Bonds. When I say 'do best', I mean that these are cautious funds that work in the opposite way to equities. Whilst you would not see a corresponding rise in the value of Fixed Interest stocks should equities fall, you will generally see a small rise."

The response then goes on to say, "Another fund that is safer in a falling equity market is the property fund which bears no correlation to equities or fixed interest."

I agree with the first paragraph, but I disagree with the second paragraph about property - I will not be investing in a property fund, as I think this is in for a fall too. Anybody disagree?

Regarding Gold, "there are funds available but you would need to look at converting to SIPP to access them. Sipp is more expensive than the plan you currently have, but given that you are looking at specialist investment options it may suit you better."

Any thoughts? (Other than I hope the big fall hasn't already started.....

)

SunnyJim · Post by **SunnyJim** » 28 Feb 2007, 09:17

Interesting.

While I agree with you that commercial property may well be in for a correction, what do you think about agricultural land?

That's where my bet is going to lie for the long term. Land is cheap at the moment unless there is a chance of developing it. Agricultural land though is undervalued in my book. Let's face it farming is this country can't get any worse than it is at the moment, and I belive that a shift in conciousness is underway. Local food will one day be on the menu again. It already is starting to shift that way. This will push local agricultural land prices up. When the supermarkets are finally forced to sell only local food due to increasing oil prices then agricultural land will reach it's true worth.

I think in many years to come, when we have re-localised our societies again then there will be two classes of people again. Landowners and land workers.

Interested to hear your opinions on agricultural land.

snow hope · Post by **snow hope** » 28 Feb 2007, 10:01

I don't disagree with a word you have said SunnyJim. I would love to buy the field behind my house. I think I will investigate that.

Post by **kenneal - lagger** » 28 Feb 2007, 14:16

Try Farmers Weekly for farms and land for sale

http://www.fwi.co.uk/Property/Search.aspx

snow hope · Post by **snow hope** » 21 Mar 2007, 11:15

I am almost decided on switching from Standard Life Pension One Ethical Fund into Invesco Perpetual Corporate Fund (recommended by my IFA) which is mainly invested in fixed interest securities such as UK Treasury stocks and corporate bonds.

The sole purpose of this switch is to mitigate the stock market crash which I see occuring very shortly (next few months). The return from the former fund in the last calendar year to Dec 06 was 24% and the return from the latter was only 0.8%! But that information is irrelevant if the stock markets were to crash by 25% for instance.

What I am trying to do is "bank" my pension fund gains to date. I plan for my continued monthly contributions to buy into the ethical fund as I feel when the crash comes, there will still be some sort of recovery - like the PO plateau.

Can I have your thoughts on this course of action? Let me know if you think this is foolish.

SunnyJim · Post by **SunnyJim** » 21 Mar 2007, 11:46

Not at all snow. I've already done it. All my pension fund is on deposit now. I've been happily watching the world markets drop over the last few weeks, safe in the knowledge I got out just at the right time.

OK, they may head up again for a while, but why be greedy? The markets have had a good four year run. Now seems a good time to get out.

Next stop is a SIPP and some land.

mocara · Post by **mocara** » 21 Mar 2007, 11:47

Mucker I couldn't agree with you more. When the former head of the BoE comes out to tell us that he left the present BoE head with a (as yet unfixed) problem to fix, you know that is just the first shot across the bow. But lets look at it another way. Say you are wrong. Your money is still 'banked' you just lost out on some growth. Are you prepared to forgo that growth on the chance that a market crash is ahead of us? If so, then I would say, don't be greedy, bank what you have and give it some time. It is possible that you could lose 60% of your stock value. The .com bubble lost many people 60% of their stock value and the cash injection there after has just pushed some of those loses into our present .house bubble

Mocara.

snow hope · Post by **snow hope** » 21 Mar 2007, 15:18

Thanks for the feedback guys. Mocara - do you have a link to what the former head of the BoE said?

mocara · Post by **mocara** » 21 Mar 2007, 15:23

http://news.sky.com/skynews/article/0,, ... 64,00.html

snow hope · Post by **snow hope** » 22 Mar 2007, 11:51

Thanks Mocara.

I have just "banked" my pension fund. So thats me protected against a stock market crash! I have transferred my Pension Fund from the Stock Market into fixed interest securities such as UK Treasury stocks and corporate bonds.

The next big decision is whether I go the SIPP route or wait for the market crash and buy back in to the stock market (getting more units) and ride the ripples.....

SunnyJim · Post by **SunnyJim** » 22 Mar 2007, 14:54

You can still use a SIPP to invest in equities. It's just that suddenly you get the choice of every fund on the market, rather than the potentially limited and crap ones your pension company offers you.

Joe · Post by **Joe** » 23 Mar 2007, 15:05

snow hope wrote:I am still prevaricating on this.

I have investigated SIPPs and was told that there are annual fees that make them a bit more costly than for instance a normal stakeholder pension - but this will be as useful as an ashtray on a motorbike when the markets crash......

As for government bonds / gilts - I have got no further with this although their recent performance seems to have been pretty poor. But my interest is what will happen to them if the stock market has its worst crash for decades. I suspect in that instance their performace may be markedly different, and it is specifically this I am trying to get an answer on.

I have also asked if you can have a SIPP invested in Gold - no answer to this either. Must start to ask some different people......

Hi Snow,

I've been reading up on gilts a bit recently. There are 2 key types for 'peak oil purposes'; fixed rate and index linked.

The fixed rate ones have a higher initial interest rate but obviously have the potential to depreciate in real terms if inflation exceeds the fixed rate - most seem to be around 4 - 5.5%

index linked ones will be called something like "1.5% index-linked trasury gilt" but obviously the 1.5% isn't fixed - it just referes to the starting %age. The "current" % is based on the RPI, as opposed to the CPI, which is good.

Clearly the index linked ones look the most defensive if you are 100% certain that there's going to be a large rise in inflation. However, if the reasonably good times persist a little longer, or if we see a sustained period of market volatility with an overall growth trend, index linked gilts will be one of the most sluggish investments around.

I guess it comes down to choosing your moment wisely. Something I'm not hugely confident about personally.

Money Morning seem to think that ripples from the sub-prime mortgage meltdown in the US are likely to head across the Atlantic fairly soon and are suggesting a move into defensive investments might be an idea at the moment. However, they are extremely contrarian and in my experience only right about half of the time.

Decisions decisions...

There's a nice description of gilts on wikipedia: http://en.wikipedia.org/wiki/Gilts.

snow hope · Post by **snow hope** » 23 Mar 2007, 16:51

Interesting thoughts Joe.

I am informed that index linked bonds (gilts) have pre-written inflation protection built-in, but as you say if inflation went up quite a bit higher - say to 10% or more then they would be very sluggish. On the other hand, if we experience deflation - which is also quite possible in my opinion, then you will have paid a premium within the return for the inflation protection which will be wasted if we have deflation....

So all in all I didn't opt for an index linked product.

From my post above, you will see I have already made the decision to go for fixed interest treasury stocks and bonds and switched my fund - yesterday - although the switch actually happens on Monday morning.

I feel somewhat relieved now I have done it - and really do feel that I have "banked" my fund to date (not that it is particularly sizeable). I am sure my pension advisor must think I am crazy - but to be fair she advises that everybody must do what is right for them as an individual - which I think is very true. I do look forward to telling her "I told you so".

One final thing - don't let greed (of rising share values) stop you making the decision to "bank" your funds - once TSHTF, it will be hard to transfer when the market is crashing hard! Mark those words my friend. Mitigation is the name of the game.