Inefficiency with AVCs

chesky369

My IFA advised me that, due to the volatility of the stock market, I should arrange for my AVC funds to be placed in a cash deposit account.
I e-mailed the fund administrators on 19 June and, after a further three e-mails and a 'phone call, the authorisation papers were sent to me on 12 July (I received them 14 July and returned them 18 July).
The transfer was finally made on 3 August - immediately following the extreme downturn.
One of the funds was worth £11,462 on 6 July but on 3 August was worth £9,011 - a loss of £2,450.
Nearly a month (18 working days) elapsed between my first request and my receipt of the forms - do I have a case against the administrators?

chesky369

I should add that this was done because I'm retiring in October and my IFA thought it would be safer at this point in time.

dunstonh

arghh, another board time out after typing a response. Here I go again.

IFA advice was spot on and had the adminstrators acted upon your requests, then you would not have lost money. It should not take that long to deal with a switch and they should action it really within 24 hours unless there are limited dealing days or they backdate to the day or day after they receive the instruction.

Contact them and if you dont get a good response, complain.

EdInvestor

On a related issue, how does the system work when people are trying to transfer out unit-linked (not with profits) pensions for drawdown?

At what point can one expect the lifeco to switch the invested fund into cash after receipt of the transfer request?

dunstonh

If you dont tell the provider to switch into the cash fund first, they will leave the money invested right up until the point the paperwork is complete and ready to transfer. That could be same day or a week later depending on service levels. Some will use the unit price backdated to the day they got the form. Missing paperwork will hold up the transfer so if you dont supply discharge forms or the receiving scheme doenst send their details, then you will get the unit price later rather than sooner.

From what I understand, a lot of the DIY cases dont get discharge forms in advance so the receiving scheme has to write to the transferring scheme who then issues the discharge forms. Sometimes they will send these to the receiving scheme, sometimes they will send direct to client. Getting these forms in advance can allow the providers to turn it round in a week or two. Without them you could be talking months (particulary if a works scheme is involved).

EdInvestor

dunstonh wrote: »

If you dont tell the provider to switch into the cash fund first, they will leave the money invested right up until the point the paperwork is complete and ready to transfer. ... Some will use the unit price backdated to the day they got the form.

I see - so there's no actual industry-wide recommended procedure? Is this aspect mentioned in pension small print anywhere?

Given that insurers won't normally do in specie transfers surely the encashment date and the transfer request should coincide?One suspects there will be a number of these cases coming up with the stockmarket turmoil at present.

I know of a provider usually regarded as one of the more efficient which has taken 5 weeks so far to do a transfer out of a maturing pension ( so it's not as though it was a bolt from the blue!) resulting so far in a loss of some 5% of fund value and possibly more if the money doesn't arrive by the end of the month.:mad:

dunstonh

I see - so there's no actual industry-wide recommended procedure? Is this aspect mentioned in pension small print anywhere?

Given that insurers won't normally do in specie transfers surely the encashment date and the transfer request should coincide?

Its not for the providers to decide what is right for you. It is for you or your adviser.

The problem is the administration. The receiving scheme needs info from the transferring scheme and vice versa. That can take anything from a few days to 6 months. Indeed, the longest transfer I have had was 18 months (couldn't happen post A day but months are still a possibility). The individual may choose to remain invested whilst it is sorted or may choose to move to a cash fund. Its their choice.

I know of a provider usually regarded as one of the more efficient which has taken 5 weeks so far to do a transfer out of a maturing pension ( so it's not as though it was a bolt from the blue!) resulting so far in a loss of some 5% of fund value and possibly more if the money doesn't arrive by the end of the month.:mad:

So, why didnt the individual move into a low risk fund or cash fund? Equally, had we been in a growth period, they could have gained 5%. The options are there if they choose to take them.

chesky369

Perhaps they tried ............

EdInvestor

dunstonh wrote: »

So, why didnt the individual move into a low risk fund or cash fund?

Because the individual thought that on receipt of the transfer request form ( supplied by the receiving scheme to be sent to the transferring scheme) this would happen automatically - as you said

Some will use the unit price backdated to the day they got the form.

Does this not seem logical? if it is a choice that the individual or advisor needs to make, why doesn't the lifeco prompt for it?

Should individuals (or advisors) be expected to have a detailed knowledge of transfer procedure such that they have to instruct the lifeco to perform every single step of it?

Surely not.

dunstonh

Because the individual thought that on receipt of the transfer request form ( supplied by the receiving scheme to be sent to the transferring scheme) this would happen automatically - as you said

So, in other words they assumed. Always a risk when you go DIY.

Does this not seem logical? if it is a choice that the individual or advisor needs to make, why doesn't the lifeco prompt for it?

What if it does take 6 weeks and the markets moves up 3%. Will the individual then complain they were not left in equities?

Possibly a good addition to have it on a form.

Should individuals (or advisors) be expected to have a detailed knowledge of transfer procedure such that they have to instruct the lifeco to perform every single step of it?

advisers should have the knowledge to do it and if someone does it themselves, they are taking on that responsibility. The life company already has to supply bucketloads of information. There comes a point when you need to reduce the paperwork.

EdInvestor

Just as a matter of interest, what if you instructed the lifeco to move a WP pension into cash as part of the transfer in the way you're suggesting and the tranfer then took several months.

Would they levy an MVA because your switch into cash meant you were not departing the fund at contractual maturity?