Standard Life transfer to Vanguard Charges

EdGasket

If SL want to change fund managers then they should pay for it themselves !

ermine

@YM some of your issues about excessive concentration eg Equitable life are reasonable, and if you have a large enough fund then there's a case to be made for diverisfying pension providers and funds/fund providers within them to address those concerns.

However, there still seems to be a dearth of facts as to what is being changed into what. Vanguard are noted for their low costs, it is possible that SL are pocketing the difference or using the whole thing as a ruse to gouge its punters but quantification of how much is being lost and how always makes a complaint stronger.

If SL want to change fund managers then they should pay for it themselves !

Depends why there's a move. If it were to get lower costs then not necessarily.

Say I had a HSBC FTAS index fund at a TER of 0.27. There might be a case to be made to move to Vanguard's equivalent at a TER of 0.15, and eat the 0.5% dealing fee and 0.5% initial fee. But only if you were going to hold for 16 years or more, according to the example calculations here.

A transfer fee isn't always a bad thing. Since there's no information on the specific funds and TERs and the fee it's impossible to say. Hopefully you should have all the relevant information and can make the calculation for yourself. Then if you feel you've taken the shaft then raise Cain, with the appropriate facts and figures.

EdGasket

It just says: "There are costs associated with the transfer... these will be reflected in the price of your funds". Thanks a lot SL.
Also as Yvonnemaus mentioned: Under the new Vanguard scheme, Quote Standard Life: "...could potentially delay processing payments out of its funds indefinitely..."
Both these are very negative features of this transfer. I have not been given any specific detials of costs but will be asking for these. So far SL have ignored my email enquiry of last thursday.

yvonnemaus

I would be surpised if SL change the AMC levied to the customer. Everyone's is different. If the IFA/broker opted to reduce or waive their trailing commission (year after year) then you might be on less, e.g. mine is 0.86%. On the other hand you might start at 1.5% reducing to 1% after 10 years. Just because Vanguard have a low AMC probably won't cause anyone's agreement with SL to change.

Adding to my previous points:

(7) Maybe the new fund is charged a low AMC (or TER) of 0.3% internally at Vanguard, as it is now an EXTERNAL manager. And then the entire fund is charged again by SL at the agreed AMC, say 0.86%. So that's actually about 1.16% total. In fact if you look at L&G's stakeholder they are upfront about this, and it is in fact the case that their external funds are charged a premium to the L&G internally managed funds. We don't know.

(8) How else could the "costs associated with transfer" be passed to the customer "reflected in the price of the fund"? What a devious statement! It's supposed to be a tracker. That means in an ideal world the fund value tracks EXACTLY the FTSE index definition. From this only EXACTLY the agreed AMC is deducted. In the real world, the fund does not quite track as the exact composition of the FTSE can't be replicated, and complex ways of compensating and/or simulating are used. So there is a tracking error, which should be small, positive or negative. The quality of an index tracker is measured by the size of this error - Virgin are arguably the worst (and consistently negative).

Now, could the conversion costs be passed on as "tracking error"? Is this illegal? Well I guess only if the definition of tracking error is that it has to be only due to imperfections in the fund composition matching the actual FTSE. We don't know what SL's statement means.

Too many unknows. I am a fan of index funds for the transparency, but this seems to have been blown out of the water by the SL letter.

I've now applied for my Sippdeal SIPP. It took an hour. An online application plus indication of SL being transferred in, and then a phone call to SL to give them the new Sippdeal account it will be going to, and a transfer form in the post to Sippdeal. Now just have to wait and see if it goes through before the conversion.

If anybody else considers this, please note I am not an adviser nor advising anything. I am merely saying that I am voting with my feet rather than fighting a company that doesn't care about customers interested in tracker funds any more. In particular anyone curious should carefully check all the Sippdeal charges (which are completely transparent). In particular if you want to drip feed monthly into an ETF tracker rather than an OEIC/Unit Trust there is a charge which could eat away a lot of the contributions.

...and there are lots of other suitable places to transfer to.

EdGasket

If I get no reply to my email, I will call on Monday to find out:
1) What exactly is the charge and how can they apply it to a previously agreed Stakeholder pension with agreed charges of 0.9% pa only?
2) What they mean by 'delaying payment of funds indefinitely'?
If I do not get a satisfactory response I will be escalating this and probably voting with my feet also though I wanted to get the final NICO payment in as Sippdeal does not accept NICO payments (irrelevant after this final payment).

yvonnemaus

Ed,

Good point about the contracting out NI rebate. I'm not in that position now. It's paid about June/July, isn't it?

Maybe you could transfer the bulk immediately, wait for the last NI rebate, and then transfer to close? Leave you to follow up with SL what you could take out whilst keeping the plan open for the rebate. Just an idea.

EdGasket

I haven't heard of partial transfers; is that possible? I thought you could only transfer everything.

jamesd

yvonnemaus wrote: »

(8) How else could the "costs associated with transfer" be passed to the customer "reflected in the price of the fund"?

Just as it is when other funds change manager: the legal and related costs are deducted from the total assets of the fund and that reduces the value.

yvonnemaus wrote: »

So there is a tracking error, which should be small, positive or negative.

There's stamp duty of 0.5% to be paid whenever the fund buys UK shares. As it must when people buy more units, perhaps after selling before then buying back later. Most funds don't charge the end user this, instead just averaging out those costs among all holders of the fund. If you held the Vanguard FTSE tracker you would be charged this when buying units. You probably aren't at SL.

yvonnemaus wrote: »

Now, could the conversion costs be passed on as "tracking error"?

Of course it shows up in the tracking error. So does most of the other spending done to manage the money, whether it's lawyers, letters to unit holders or the salaries of the people working on it. SL is switching from having its own people and systems doing the managing to having Vanguard paid to do it instead. Either way the fund holders pay the cost of the managing work.

EdGasket wrote: »

2) What they mean by 'delaying payment of funds indefinitely'?

Funds are allowed to suspend redemptions if there is more demand than can be satisfied from the cash on hand. They will typically try to sell liquid assets after that but settlement takes a few days and it may disadvantage those who are not selling so they may have an obligation not to do it as rapidly as those trying to sell would like. An ETF has a different structure and the the time it takes between deal and settlement is visible to the consumer instead of happening behind the scenes. A fund retailer might try to mask this delay when the amount of money involved in redemptions is low enough but may choose not to do it when it's higher. This sort of things is much more likely in illiquid property funds than shares in the FTSE. If a lot of people want to sell now then delaying some of those sales to be fairer to those who are not selling may be appropriate.

EdGasket wrote: »

I haven't heard of partial transfers; is that possible? I thought you could only transfer everything.

The law allows partial transfers. It's up to the pension provider whether they do.

Looks as though a few people are over-reacting to a pretty normal event. It's perhaps more common in the investment trust world than in unit trusts for the money manager to be changed.

mr_fishbulb

Ooooh I didn't know they now did vanguard. I got a new job at the end of last year, so my pension switched from Standard Life to Fidelity. I might move all my Standard Life money into Vanguard funds

How do I find out how much these funds will cost in my pension? When I go to the page where I can change my investments, the Vanguard ones don't seem to have factsheets.

EdGasket

Why do you want to jump into a fund with unknown 'extra costs' and which you may be locked into indefinitely?
I tried to call SL today but after replying Vanguard to the automated question, I was informed there would be a 10 minute wait. Well no thank you, not with Virgin Media who charge a fortune for 0845 numbers. I will keep plugging away with the online query form and will move funds out of the tracker and into a cash fund to avoid the extra charges while I wait for my last NICO payment then I'm off to Sippdeal.