Standard Life transfer to Vanguard Charges

Aegis

From saynoto0870.com, there's this geographic number listed for Standard Life Pensions team: 0131 245 6367

jamesd

mr_fishbulb, this is different from making Vanguard's own funds available, that started happening back in December. This is about Vanguard managing SL's own tracker funds and "The fund names, fund management charges and risk profiles will remain the same. The transfer of the underlying investments will be completed in stages throughout June and will be finalised by 29 June 2012".

I'm not sure that there's any reason to use the SL funds if the Vanguard ones are available, except that there is an initial charge related to stamp duty for the ones that hold significant amounts of UK shares and that won't apply to the SL funds. That would presumably make an SL UK index tracker cheaper than a vanguard one if the intent wasn't long term holding, which would become more expensive due to the higher annual charge of the SL fund.

You'll also need to check commission if you have an IFA commission added to fund charges. It probably will apply to the Vanguard funds and would perhaps double or more the effective annual cost of using them.

yvonnemaus

jamesd,

I'm a bit confused. Without double-checking, we are only looking at SL's Stakeholder, and only at index tracker funds.

So surely any issues with stamp duty, inital charge and commission goes out of the window. I thought Stakeholders could not apply entry and exit fees? Does initial charge or stamp duty ever apply to index tracker funds?

For simplicity consider only the FTSE tracker. One of these trackers is pretty much the same as any other. They should all hold the same (representative) shares, and therefore perform identically (ignoring tracking error, which should be small). So why should I care who runs the fund? Sure, Vanguard is a good company, but this whole conversion exercise is only about index tracker funds. If, as quoted, "...<everything>... remains the same", then why the vague warnings about costs in the letter? It should remain as: track the index definition (same for every tracker) less 0.86% (or whatever the agreed AMC was for each customer separately).

And I would be wary of assuming that magically Vanguard means less AMC. Everyone has a pre-agreed AMC and everyone's is different depending on the introducing adviser. It would be complex to change.

Also, in response to your comment of 14-04-2012 at 11:12, all these costs look more relevant to Managed Funds. I guess for many people it would be OK to take a hit now and have a wider range of Vanguard funds available in the future. But many others (like myself) deliberately moved to (a) a Stakeholder, and (b) to an Index Tracker within it, to get away from a myriad of miscellaneous charges eating up their investments, and see just one flat AMC applied, and, importantly, penalty-free mobility.

If I wanted to swap to another effectively identical FTSE tracker fund, I could do it for nothing:

- Selling an index tracker as an OEIC or Unit Trust costs nothing: there is no bid/offer spread, and no exit charge. Similary for buying the new fund.
- Leaving a Stakeholder costs nothing: there is no exit charge. Similary for joining the new pension plan.

The difference is that it's my time spent to do the job (unpaid), against SL's time, material, etc (paid for by ...???)

A fund rearraging itself may be a frequent occurrence, but for some other reason than going from like to like. I can see that it is sensible for SL to drop handling index trackers, due to the explosion of specialist organisations such as Blackrock, DeutscheBank, Source, Vanguard , State Street, etc, in this market, but they should pay for it transparently to their customers.

But there again, if they don't want that market, maybe they don't want its customers any more either. The canny plumber that doesn't want the job just gives a ridiculously high quote, doesn't he?.

jamesd

The costs note is because there are costs involved in changing a manager. Perhaps redundancy payments to some of SL's own employees who used to do the work and some legal costs, the total amount of which won't be known until the work is completed. The annual management charge includes a lot of costs but it doesn't include all of them.

Within the SL pension product you may have two different FTSE All Share Index tracker funds available now, I do in mine:

Standard Life FTSE* Tracker Pension Fund (the old one with new Vanguard manager)
SL Vanguard FTSE* UK All Share Index Pension Fund (introduced in December)

Lets consider Vanguard's own FTSE All Share Index tracker. That has a 0.5% initial charge and 0.15% annual charge when purchased via Hargreaves Lansdown and I assume it has the same initial charge in the SL form as well, I've asked. That 0.5% initial charge is the same amount as the stamp duty that Vanguard will have to pay to buy the shares for the fund to fulfil the purchase request. Within the SL product if there's an IFA commission I assume that would be added on top of the Vanguard annual charge and funded by selling units, just as rebates of commission or discounts are funded by adding units.

SL's FTSE All Share Index tracker in Stakeholder form may instead have a nil initial charge and 1% annual management charge. The annual charge is so much higher, but within Stakeholder pension rules, that it allows room to not make the initial charge but to quickly recover it from the annual charges instead. There's also room to take the IFA commission if any out of the annual management charge instead of adding it on top. Vanguard being manager of these now makes no difference to the explicit initial and annual charges nor the commission on these funds.

Stakeholder and normal personal pensions using internal funds gets you some simplicity because the explicit charges are capped and the TER is bundled in with the AMC to just one AMC number but it doesn't necessarily get you lower charges. More likely higher if your pension fund is large enough.

Changes of manager aren't particularly uncommon if you check the SL fund news page.

27/02/2012 one fund changed administrator
23/01/2012 fourteen BlackRock and Liontrust funds changed administrator
14/12/2011 one fund changed administrator

yvonnemaus

jamesd,

Thanks for the clarification of the internal charges.

I don't think I have ever paid initial commission on a tracker fund, be it in ISA or pension, I'll have to check. Perhaps it depends on who you buy it through. Is the 0.5% on a Vanguard fund actually Hargreaves' commission which would not be there if bought through another route?

Related to this, I did notice a couple of years ago that Legal & General started to reserve the right to split the buy and sell prices (i.e. introduce a bid/offer spread) on most of their OEIC funds on a day by day basis. Presumably this depended on whether buyers and sellers balanced each other out for the midday shuffle, and whether they would need to trade shares. But, they explicitly excluded the index trackers from this

Also, as stated in an earlier thread, L&G apply a surcharge for investing in an "external" fund in their own stakeholder. This potentially breaks the 1.5% or 1% limit which applies if you stick to their internally managed funds. I am not a fan of multi-layer (or multi-manager, or "fund of funds") arrangements because of this horrid complexity. I also feel it far less likely that additional charges to the published AMC would occur with a simple single manager tracker.

As an example, if I used a SIPP, the SIPP wrapper charges are explicit, mainly being a fixed trading fee (say £10), and maybe a fixed annual charge for the SIPP wrapper (say £0). Then to be absolutely sure that no other charge is made other than the advertised AMC, I could buy a synthetic index tracker which has no tracking error. So the fund will track the underlying index exactly minus the AMC. It promises to do so and there is no possibility that costs due to internal business activities can change this. (Let's not go into the pros and cons of synthetic tracker funds here, shall we!). Although if bought on-exchange there would be a bid-offer spread too, typically a 0.5% loss on sale.

This excludes something going terribly wrong, in which case it does not matter where you are as the financial industry then ignore any promises anyway (e.g. Equitable, or many property funds which suspended trading in the credit crunch, etc).

jamesd

The initial charge is described by Vanguard as its Stamp Duty Reserve Tax payment. The HL charges for the funds match the ones from Vanguard direct, except for the HL platform charge.

A dilution levy for larger deals wouldn't be surprising from an ETF or an OEIC equivalent. An OEIC price would normally move in a window to reflect the balance of buying and selling but it would be more fair to charge a special price for larger transactions so those just holding or doing small deals don't cross-subsidise the larger traders.

yvonnemaus

Interesting. Also I hadn't looked at the Hargreaves site lately. They are excellent if you stick to (OEIC) funds. Then maybe edgasket ought to consider them as another option: buy and hold for an easy life. No HL annual or dealing charges, as these are loaded in the funds themselves one way or another.

Hargreaves lose their edge for shares and ETFs as a 0.5% pa annual charge kicks in as well as the usual dealing charges. These aren't really esoteric holdings nowadays, and other providers such as SippDeal don't apply an annual charge. Maybe HL will follow suit one day.

f_of_f

I did call SL and checked about the future AMC / TER. It remains at 1% for the Vanguard-managed trackers in my Group Pension Plan, which is hugely frustrating given that I buy an identical fund with a TER of 0.15% from Vangaurd in my SIPP. I presume much of the extra is a trailing fee for the adviser who, bearing in mind I made all of the investment decisions myself, certainly hasn't earnt it!

Once I leave this job I'll be migrating the fund to my SIPP. At least the greater TER with SL is worth it for the 5% pension contribution from my employer.

jamesd

Well, that does help you to know where you should buy that particular fund. I agree that it's frustrating and am probably in a similar position.

gadgetmind

EdGasket wrote: »

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

Sadly, partial transfers are at the discretion of the pension company and IME most don't allow it.

I wanted to use this to keep pulling money out of my GPP and across to my SIPP, which is more flexible and has much lower fees. Sadly, Friends Life (nee Provident) said ixnay.

(Actually, they said they could, but it would end one pot and start a new one, and this would cause my Pension Input Period funnies.)