Cheap Pensions

dunstonh

adam81 wrote: »

Your saying the 0.1% is the effective charge for the relief cash not be investing straight away are you? So I guess if you rarely invest this money the 0.1% only increases?

pre-funding is used on contributions in and fund switches. So, it benefits both of those. If you dont do much or anything there then prefunding is not an issue.

zagfles

dunstonh wrote: »

pre-funding is used on contributions in and fund switches. So, it benefits both of those. If you dont do much or anything there then prefunding is not an issue.

I've done loads of switches with HL and they didn't involve being out of the market for any time at all. Pre-funding isn't needed as the settlement date for both buying and selling is a few days later so you can buy at the same time as you sell, as you don't need to pay for the buy until you get the funds from the sell.

It might apply to the odd transaction where the settlement date for the sell is longer than for the buy, but never happened to me.

dunstonh

zagfles wrote: »

I've done loads of switches with HL and they didn't involve being out of the market for any time at all. Pre-funding isn't needed as the settlement date for both buying and selling is a few days later so you can buy at the same time as you sell, as you don't need to pay for the buy until you get the funds from the sell.

It might apply to the odd transaction where the settlement date for the sell is longer than for the buy, but never happened to me.

Without prefunding you have to wait to settlement on the existing fund (which would be T+2 or T+3 with most). The unit price you are given is that after that. you dont get the unit price on the day you submit the instruction. With prefunding, you do (get the price at the next dealing point)

zagfles

dunstonh wrote: »

Without prefunding you have to wait to settlement on the existing fund (which would be T+2 or T+3 with most). The unit price you are given is that after that. you dont get the unit price on the day you submit the instruction. With prefunding, you do (get the price at the next dealing point)

I've got contract notes from HL for switches which show the buy & sell done on the same day.

As it says here http://www.hl.co.uk/video/how-to-switch-funds
"If you asked to raise a specific cash value we shall place both the sale and the purchases at the same time."

dunstonh

Have you checked the unit price on the actual sales rather than the presale information? Those that don't prefund will still key the expectation based on current information but will use the actual figures after settlement.
Maybe HL pre-fund switches but not tax relief?

zagfles

dunstonh wrote: »

Have you checked the unit price on the actual sales rather than the presale information? Those that don't prefund will still key the expectation based on current information but will use the actual figures after settlement.
Maybe HL pre-fund switches but not tax relief?

If you're switching a cash value eg £10,000 of fund A to fund B then they don't need to prefund or guess. Assuming the same settlement period. They know that on T+3 or whenever they'll get £10,000 from fund A which can then be paid to fund B.

If you're selling an entire holding or a number of units they wait until they know how much will be raised.

I think there's a % limit for cash values something like 90% in case the fund plummets and isn't worth the cash value you specified at the next valuation point.

dunstonh

If you're switching a cash value eg £10,000 of fund A to fund B then they don't need to prefund or guess. Assuming the same settlement period. They know that on T+3 or whenever they'll get £10,000 from fund A which can then be paid to fund B.

That is not possible without pre-funding.

The money does not arrive until 3 days later. The purchase is made at the point cleared funds are received and the unit price is not known until that point. If they make the purchase and honour the unit price at the same time as the sale then that is pre-funding.

The lang Cat did a good article on pre-funding. You may want to look it up.

zagfles

dunstonh wrote: »

That is not possible without pre-funding.

The money does not arrive until 3 days later. The purchase is made at the point cleared funds are received and the unit price is not known until that point. If they make the purchase and honour the unit price at the same time as the sale then that is pre-funding.

The lang Cat did a good article on pre-funding. You may want to look it up.

Everything I've read on settlement says the cash changes hand on the settlement date. But I really don't care either way, I know HL buy and sell at the same time on every switch I've done.

dunstonh

zagfles wrote: »

Everything I've read on settlement says the cash changes hand on the settlement date. But I really don't care either way, I know HL buy and sell at the same time on every switch I've done.

Fine. We will just have to disagree. I suspect HL pre-fund switches and that is what you are seeing.

However, for everyone else, it is worth checking if your platform does prefunding if you are making regular contributions or being an active fund switcher. The Lang Cat article on pre-funding is a paid for article. However, there is summary media coverage of it here:
http://www.professionaladviser.com/ifaonline/feature/2333888/pre-funding-what-is-it-and-which-platforms-do-it