Standard Life transfer to Vanguard Charges

jamesd

Pension input period chances wouldn't be enough to stop me from doing it, I think. Fortunately both the recent work plans I've had have accepted that, after I asked. The SL one I'm in now has a requirement that I leave £5,000 in and a £50 fee each time for the third and subsequent transfers out.

EdGasket

Finally, after 18 days, I had a reply to my email today asking about the charges. There was a lot of praise for Vanguard being a better manager and in the best interest of policyholders etc. Not sure how that applies to a tracker fund as it should be a mechanical process with no fund manager skill required.
About extra charges, it says:
"The intention is to transfer as many assets as possible on an ‘in-specie’ basis – this means we transfer stock rather than cash and the investment is not out of the market for any period of time. Costs will only arise where a full in-specie transfer is not possible.

To emphasise the point that we are working to keep costs to a minimum, for the fund you are invested in – the Standard Life FTSE Tracker Pension Fund – we are targeting an in-specie transfer of assets of between 99.98% and 100%."

I guess the unspecified charges are negligible then, if they are within 99.98% and 100% but by the same token, I don't see why they can't come out of the annual 1% charge. C'est la vie. I will be moving it to Sippdeal soon to avoid the annual management charge. As previous poster said, why pay 1% when you can pay 0.15% instead (+ dealing charge admitedly).

Here's another gem from the reply:
"We firmly believe the move to Vanguard will be positive for customers, as they are being moved from a fund manager whose focus was not on passive investing to one who has global scale and decades of expertise in this area. "
So the previous manager of the FTSE tracker did not have a focus on passive investing? Did he need to have a focus ? So long as he bought the index; that's all that was required. If anyone understands, please explain.

yvonnemaus

Ed,

It's all smokescreen. There's no decision making in a tracker- the decisions are defined as a simple formula by the creator of the index. There are some complications in how to get as close as possible to the index, as often you can't buy exactly the right shares in the right quantities at the right time, but again this is done systematically. An ideal tracker's performance (money-wise) should match EXACTLY the index minus the AMC of the tracker fund. In practice there is a deviation called tracking error. The quality of a fund can be measured by how big this error is, and it can be either way. I read about a year ago a manager praise his tracker fund for out-performing the index by a long way. Well this is a bad tracker - performance could go wildly the other way next time. I also read about a lady that didn't look at her Virgin UK tracker for ten years, relying on the FTSE index reports, only to find that the fund itself had lost 30% against the index. This was partly due to the high 1% charge and partly their inability to track.

As I said in a previous post, I like trackers because I am making the decision to go with this simple formula. Sure, the formula may contain shares which are clearly undesirable at any point in time, but as soon as you start making "intelligent" decisions, it is "active", and with that comes high charges, and the possibility that the manager in a whim makes a decsion which not only turns out bad but actually totally against the mission of the fund that you bought. There are dozens of trackers now defining different sectors, different geographic areas, etc, and you can move money around easily to match your own expectations based on simple high level views of the world. The trackers themselves are just mechanical. The upside to compensate for simple selection process is that you have diversified across many companies so if one goes bust it shouldn't affect you.

It's sad that a company admit that they don't think they had the correct focus on a fund they overcharge for! Maybe a better statement would be that they do not want to compete with the rise of companies that specialise in tracker funds (most of which now are trackers within ETFs - Blackrock iShares, DeutscheBank x-trackers, Source, SRPD, Invesco Powershares, CreditSuisse), so they are dropping theirs to concentrate on managed funds.