Standard Life Payment-Processing Delay as Market Dropped

will_b

SUMMARY: a big payment was paid in to my Standard Life pension on the Tuesday, they didn't process the payment for several days (much slower than usual) as the market was plummeting, but then when they did eventually process it, they bought my fund units at the earlier higher price rather than the later considerably-lower price.  So I got considerably less fund units as a result.

CONCLUSION (FROM THE DISCUSSION IN THIS THREAD AND SUMMARISED HERE SO YOU DON'T HAVE TO READ IT ALL): This is normal practice and it would work the same if the market was rising too.  Nothing to be concerned about.

FULL STORY

On Tuesday 10th March at about midday my company made a large employer payment into my Standard Life pension.  It was made by bank transfer, as usual, with the pension account number as the payment reference.  This has been done many times before in the same way, without problems.

I expected the payment to show up in my online pension account the next morning (Wednesday 11th) - that's how it's always worked in the past.  But it wasn't there on Wednesday 11th, or Thursday 12th, or Friday the 13th...

So on Friday 13th I gave them a call...  And they looked, and said "ah yes, I've found the payment, we must have missed it, I'll put in a note to get it processed this afternoon".  "So it'll go in Monday?" I asked.  "Assuming it gets processed in time, yes", they said.  "If not, then Tuesday."  And then a couple of hours later I got an email from someone at Standard Life (not an automated email) to say that they had "actioned the request" that afternoon.  So I assumed I'd see the money added to the MyFolio Market V fund in my pension on Monday morning.

As the market had dropped a lot over those few days, I actually thought the delay was quite lucky, because I assumed the fund purchase would go through at the later, lower price.  But, when I looked on Monday morning, I saw that they had purchased fund units at the higher price that I would have got if they had processed the payment promptly as they usually do.

Initially I was annoyed by this as it seems they bought fund units for my account at a considerably cheaper price (over 10% cheaper) than the price I actually got for the fund units that were credited to my account.  Basically it seemed like I had overpaid for the fund units that I got.  But then I remembered that I don't know how the system should work.  I did get the price that I would have got if all had gone smoothly in the first place.  But, if they'd been slow to process the payment, and the market had leapt up in the meantime, would they have given me the cheaper price that I would have got if it wasn't for the delay?  I'm not sure, I think they would have lost quite a lot of money if they had.

These are rather crazy times and they are probably quite overwhelmed, I appreciate that.  But what do you think, did Standard Life do something wrong here?  (EDIT: the answer is no, they did exactly what they should have done, nothing to be concerned about.)

Thrugelmir

With the end of the tax year approaching there's no doubt a rush of last minute contributions being made to meet the deadline. Which will result in a delay in processing. The date and time that the money was actually received by SL will determine the unit price purchase cost. All investors have to be treated equally. 
Investing in volatile markets can produce very differing outcomes. In the greater scheme of things. It's the longer term that matters not what the unit price is trading at currently. 

will_b

Thrugelmir said:

With the end of the tax year approaching there's no doubt a rush of last minute contributions being made to meet the deadline. Which will result in a delay in processing. The date and time that the money was actually received by SL will determine the unit price purchase cost. All investors have to be treated equally. 
Investing in volatile markets can produce very differing outcomes. In the greater scheme of things. It's the longer term that matters not what the unit price is trading at currently. 

Thank you, that is reassuring.  I'm not worried about the volatility, but I do want to keep faith that my pension provider is handling payments correctly.  I don't have a problem with delays so long as they are processed properly when they happen.  So this is good

Albermarle

I previously had a pension with Aviva. Every lump sum payment I made got stuck in their system and needed a phone call .
The answer was always the same as you received from SL -  And they looked, and said "ah yes, I've found the payment, we must have missed it, I think they always backdated the fund purchase to the original date as well .
So nothing so unusual.

will_b

Albermarle said:

I previously had a pension with Aviva. Every lump sum payment I made got stuck in their system and needed a phone call .
The answer was always the same as you received from SL -  And they looked, and said "ah yes, I've found the payment, we must have missed it, I think they always backdated the fund purchase to the original date as well .
So nothing so unusual.

Also great to hear, thank you!  Standard Life have always been very prompt in processing payments in the past, so I'm guessing it was just that they were overwhelmed at the time.

Thrugelmir

Albermarle said:

I previously had a pension with Aviva. Every lump sum payment I made got stuck in their system and needed a phone call .
The answer was always the same as you received from SL -  And they looked, and said "ah yes, I've found the payment, we must have missed it, I think they always backdated the fund purchase to the original date as well .
So nothing so unusual.

No doubt was just caught in a processing queue. Staffing issues can play havoc in the short term in what are often large open plan offices containing several hundred people in close proximity.  Only takes one person to trigger a localised meltdown in the short term. 

Ciprico

SL don't "gain" if you pay a higher or lower price, so no motivation for them to be "imaginative"...

will_b

123mat123 said:

SL don't "gain" if you pay a higher or lower price, so no motivation for them to be "imaginative"...

If I give them £1000 to invest in a fund that costs £1 per unit, and they invest it straight away, I get 1000 units.  But if they wait a few days and the price of the units drops to £0.80 per unit, and then they invest, they can buy 1000 units to put in my account for £800, and there's £200 left over.  Overall the gains from processing delays when markets fall might be balanced out by the losses from processing delays when markets rise, but in this case surely that £200 has to go somewhere?  Perhaps I'm missing something!

(EDITED just to add that, although I doubt there is any abuse, it does still seem to me to be feasible, as my simple example aims to demonstrate.)

Thrugelmir

will_b said:

123mat123 said:

SL don't "gain" if you pay a higher or lower price, so no motivation for them to be "imaginative"...

If I give them £1000 to invest in a fund that costs £1 per unit, and they invest it straight away, I get 1000 units.  But if they wait a few days and the price of the units drops to £0.80 per unit, and then they invest, they can buy 1000 units to put in my account for £800, and there's £200 left over.  Overall the gains from processing delays when markets fall might be balanced out by the losses from processing delays when markets rise, but in this case surely that £200 has to go somewhere?  Perhaps I'm missing something!

(EDITED just to add that, although I doubt there is any abuse, it does still seem to me to be feasible, as my simple example aims to demonstrate.)

Cash will be invested according to time and date received not the processing date. The world of business doesn't work in real time. There's a lag. 

will_b

Thrugelmir said:

will_b said:

123mat123 said:

SL don't "gain" if you pay a higher or lower price, so no motivation for them to be "imaginative"...

If I give them £1000 to invest in a fund that costs £1 per unit, and they invest it straight away, I get 1000 units.  But if they wait a few days and the price of the units drops to £0.80 per unit, and then they invest, they can buy 1000 units to put in my account for £800, and there's £200 left over.  Overall the gains from processing delays when markets fall might be balanced out by the losses from processing delays when markets rise, but in this case surely that £200 has to go somewhere?  Perhaps I'm missing something!

(EDITED just to add that, although I doubt there is any abuse, it does still seem to me to be feasible, as my simple example aims to demonstrate.)

Cash will be invested according to time and date received not the processing date. The world of business doesn't work in real time. There's a lag. 

But my pension is invested in SLI MyFolio Market V, which is a fund of funds comprised of external funds like:

L&G UK Index Trust

Vanguard FTSE UK All Share Index

Vanguard US Equity Index

So to provide SLI MyFolio Market V units to me, at some point SLI actually has to buy into those funds that they don't have control over, no?  When markets are dropping, the later they buy those funds, the cheaper they get the fund units.

Again, I could well be missing the point, apologies if I am!

EdGasketTheSecond

If you are cynical you might think they bought cheaper units but charged you the old price. They probably don't do that but there again I am not sure how they can 'backdate' an investment without buying units at today's price; maybe they feed your payment in and recalculate everything; I don't know.