SIPP transfer process, timing, valuations

intalex

I'm in the process of transferring my workplace pension (WP) to a SIPP with a different provider, and just wondering if like me others have experienced a case of providers using the flexibility in the process to optimise the timing of each task to benefit themselves - I'm experiencing little nibbles (losses) in all the below:

1. Switch from multi-asset fund into cash-like fund (both in WP) confirmed in writing as completed on day X, but actual disinvestment transaction executed as of day X+1 when valuation had dropped (fortunately the cash-like fund value was static on both days so no nibble there) - if the valuation had risen would they still do it as of day X+1 or conveniently stuck to day X as per their confirmation?

2. Disinvestment from cash-like fund into cash "backdated" to day Y-2 (lower valuation vs day Y) whilst initiating BACS funds transfer on day Y. Retrospectively, this would appear as though they were holding on to the funds in cash form for 2 days before the transfer, even though the online account had the funds appearing in the cash-like fund right up to day Y when the policy completely disappeared from the online system.

3. Day Y was conveniently a Thursday when the BACS was initiated, which ensured the funds wouldn't debit their account until after the weekend on day Z (Tuesday in my case due to bank holiday), which is also when the funds would be received by the SIPP provider.

4. Coincidentally, day Z is also the date each month that the WP would normally pay a rebate in lieu of a discount on annual maintenance charge, but of course this was conveniently left out.

5. SIPP provider received the funds promptly on day Z and sent me an email to confirm this, but in the same email stated it would take 1 working day for the cash to appear in my SIPP account - surely it would be faster to just reflect the cash in my account than writing and sending that email?

Seeing what has happened at every step of the way has got me thinking about whether such things are deliberate and yet somewhat "protected" under the flexibility offered by official guidelines and timelines?

Thanks in advance for sharing your thoughts and experiences.

Notepad_Phil

intalex said:

I'm in the process of transferring my workplace pension (WP) to a SIPP with a different provider, and just wondering if like me others have experienced a case of providers using the flexibility in the process to optimise the timing of each task to benefit themselves - I'm experiencing little nibbles (losses) in all the below:
...

I've done multiple transfers, and sometimes I've missed out due to the dates that things have happened, but I've also gained sometimes too.

Transfers are mostly automated these days so there's little chance, even if someone wanted to, to interfere with the transfers and deliberately hold or speed up some bit or change the dates that things have happened so that a bit of extra profit can be made.

The way I look at such things is that suppose a regular financial company did employ a team of people to do this, then in reality the company would be under constant threat of blackmail from one of those employees threatening to spill all to the press on what was going on. The reputational damage would be enormous and far outweigh any small amounts they would have made along the way.

Marcon

intalex said:

I'm in the process of transferring my workplace pension (WP) to a SIPP with a different provider, and just wondering if like me others have experienced a case of providers using the flexibility in the process to optimise the timing of each task to benefit themselves - I'm experiencing little nibbles (losses) in all the below:

1. Switch from multi-asset fund into cash-like fund (both in WP) confirmed in writing as completed on day X, but actual disinvestment transaction executed as of day X+1 when valuation had dropped (fortunately the cash-like fund value was static on both days so no nibble there) - if the valuation had risen would they still do it as of day X+1 or conveniently stuck to day X as per their confirmation?

2. Disinvestment from cash-like fund into cash "backdated" to day Y-2 (lower valuation vs day Y) whilst initiating BACS funds transfer on day Y. Retrospectively, this would appear as though they were holding on to the funds in cash form for 2 days before the transfer, even though the online account had the funds appearing in the cash-like fund right up to day Y when the policy completely disappeared from the online system.

3. Day Y was conveniently a Thursday when the BACS was initiated, which ensured the funds wouldn't debit their account until after the weekend on day Z (Tuesday in my case due to bank holiday), which is also when the funds would be received by the SIPP provider.

4. Coincidentally, day Z is also the date each month that the WP would normally pay a rebate in lieu of a discount on annual maintenance charge, but of course this was conveniently left out.

5. SIPP provider received the funds promptly on day Z and sent me an email to confirm this, but in the same email stated it would take 1 working day for the cash to appear in my SIPP account - surely it would be faster to just reflect the cash in my account than writing and sending that email?

Seeing what has happened at every step of the way has got me thinking about whether such things are deliberate and yet somewhat "protected" under the flexibility offered by official guidelines and timelines?

Thanks in advance for sharing your thoughts and experiences.

I think you're looking for issues - and with pensions there's a near-guarantee that you can find something you don't like/think is worthy of complaint!

Doesn't seem to be anything untoward about what you see as providers massaging the system.

intalex

Marcon said:

I think you're looking for issues - and with pensions there's a near-guarantee that you can find something you don't like/think is worthy of complaint!

Doesn't seem to be anything untoward about what you see as providers massaging the system.

Just a bunch of unfortunate (for me) coincidences then?

dunstonh

1. Switch from multi-asset fund into cash-like fund (both in WP) confirmed in writing as completed on day X, but actual disinvestment transaction executed as of day X+1 when valuation had dropped (fortunately the cash-like fund value was static on both days so no nibble there) - if the valuation had risen would they still do it as of day X+1 or conveniently stuck to day X as per their confirmation?

What is your reference to X?  Are you using that in place of the standard T?  i.e. T+1

Trade and settlement periods are defined.  There is no play on them.

2. Disinvestment from cash-like fund into cash "backdated" to day Y-2 (lower valuation vs day Y) whilst initiating BACS funds transfer on day Y. Retrospectively, this would appear as though they were holding on to the funds in cash form for 2 days before the transfer, even though the online account had the funds appearing in the cash-like fund right up to day Y when the policy completely disappeared from the online system.

If the provider uses pre-funding, then settlement periods would be disregarded.  if the provdier does not use prefunding, then the settlement periods would be in play.

3. Day Y was conveniently a Thursday when the BACS was initiated, which ensured the funds wouldn't debit their account until after the weekend on day Z (Tuesday in my case due to bank holiday), which is also when the funds would be received by the SIPP provider.

The money leaves their account on the day they initiate the BACS or CHAPS. 

4. Coincidentally, day Z is also the date each month that the WP would normally pay a rebate in lieu of a discount on annual maintenance charge, but of course this was conveniently left out.

You made the decision on when to transfer.  So, that one is on you.

5. SIPP provider received the funds promptly on day Z and sent me an email to confirm this, but in the same email stated it would take 1 working day for the cash to appear in my SIPP account - surely it would be faster to just reflect the cash in my account than writing and sending that email?

So, you consider communication a bad thing?  I think its good that they emailed to confirm receipt. 

It doesnt prevent them for doing the transaction itself.   

Some providers operate their software in real time.  Some update it overnight.  If you have chosen one that operates with one snapshot a day (i.e. overnight) then moaning it's not doing it in real-time means you made the wrong choice.   You should have chosen a provider that gives you what you want.

No issues with anything you have said.  A bit of misunderstanding on your part but thats all.  There is no fraud going on (which is what you are hinting at).

intalex

dunstonh said:

1. Switch from multi-asset fund into cash-like fund (both in WP) confirmed in writing as completed on day X, but actual disinvestment transaction executed as of day X+1 when valuation had dropped (fortunately the cash-like fund value was static on both days so no nibble there) - if the valuation had risen would they still do it as of day X+1 or conveniently stuck to day X as per their confirmation?

What is your reference to X?  Are you using that in place of the standard T?  i.e. T+1

Trade and settlement periods are defined.  There is no play on them.

The date (a Friday) on which they emailed me confirmation that the switch had already been completed, only for the actual sale of multi-asset fund units and purchase of cash-like fund units to be completed on Monday end of day using Monday's (lower) mid-day valuation

2. Disinvestment from cash-like fund into cash "backdated" to day Y-2 (lower valuation vs day Y) whilst initiating BACS funds transfer on day Y. Retrospectively, this would appear as though they were holding on to the funds in cash form for 2 days before the transfer, even though the online account had the funds appearing in the cash-like fund right up to day Y when the policy completely disappeared from the online system.

If the provider uses pre-funding, then settlement periods would be disregarded.  if the provdier does not use prefunding, then the settlement periods would be in play.

Not sure I understand what you mean, but the BACS transfer was triggered on the Thursday whereas the sale of the cash-like fund units appeared to be done on Thursday as well, but using Tuesday's (lower) valuation.

3. Day Y was conveniently a Thursday when the BACS was initiated, which ensured the funds wouldn't debit their account until after the weekend on day Z (Tuesday in my case due to bank holiday), which is also when the funds would be received by the SIPP provider.

The money leaves their account on the day they initiate the BACS or CHAPS. 

My understanding of BACS is that the instruction is sent on the initiation date, but the sender's account is debited and receiver's account credited simultaneously 2 working days later. So I'm not sure if (like old times) the funds are in transit for a single day, unless I'm mistaken?

4. Coincidentally, day Z is also the date each month that the WP would normally pay a rebate in lieu of a discount on annual maintenance charge, but of course this was conveniently left out.

You made the decision on when to transfer.  So, that one is on you.

Fair point, but is it an incentive to complete the transfer sooner rather than later, something of a rebate avoidance?

5. SIPP provider received the funds promptly on day Z and sent me an email to confirm this, but in the same email stated it would take 1 working day for the cash to appear in my SIPP account - surely it would be faster to just reflect the cash in my account than writing and sending that email?

So, you consider communication a bad thing?  I think its good that they emailed to confirm receipt. 

It doesnt prevent them for doing the transaction itself.   

Some providers operate their software in real time.  Some update it overnight.  If you have chosen one that operates with one snapshot a day (i.e. overnight) then moaning it's not doing it in real-time means you made the wrong choice.   You should have chosen a provider that gives you what you want.

Seeing it reflected on my account the next day is fine, but to also have a credit date of the next day when the funds were received a day earlier, is that also fine?

No issues with anything you have said.  A bit of misunderstanding on your part but thats all.  There is no fraud going on (which is what you are hinting at).

Basically, when I see the presence of leeway to "choose" between a few options and the flexibility to action such tasks retroactively, it is natural to doubt if the provider will choose options that are financially optimal for themselves, be it manual or automated. I haven't been able to find clear documented guidelines for either provider, aside from being quoted a generic 3-5 weeks timeline, and as it's only my first experience of a SIPP transfer and with all 5 points above turning out not in my favour, I just had to tap into the knowledge and experience of MSEs to learn and understand more.

Responses in-quote in bold.

Marcon

intalex said:

Marcon said:

I think you're looking for issues - and with pensions there's a near-guarantee that you can find something you don't like/think is worthy of complaint!

Doesn't seem to be anything untoward about what you see as providers massaging the system.

Just a bunch of unfortunate (for me) coincidences then?

I think quite a lot of misunderstanding and groundless suspicion would be closer to the mark.

NoMore

Is it just me, but I'm struggling to see what gain the OP thinks the provider makes ? Yes the OP may feel they lost due to selling at a lower price point, but the provider doesn't make any extra money because of that.

Marcon

NoMore said:

Is it just me, but I'm struggling to see what gain the OP thinks the provider makes ? Yes the OP may feel they lost due to selling at a lower price point, but the provider doesn't make any extra money because of that.

Lack of understanding - which is what's fostering the suspicion.

dunstonh

The date (a Friday) on which they emailed me confirmation that the switch had already been completed, only for the actual sale of multi-asset fund units and purchase of cash-like fund units to be completed on Monday end of day using Monday's (lower) mid-day valuation

Trade dates and settlement dates are different.  Most funds are T+2 or T+3.  If there was no prefunding offered by your provider, the T date on the deposit fund would be about 2-3 days after the trade date because of that settlement date.   In your case, your current provider uses prefunding.  So, you get no settlement period.   You get the sale price today and the purchase price tomorrow.      

Prefunding costs money.  You tend to find that most DIY SIPP providers do not prefund.  Its usually the insurers or old big names.    So, just remember that when it comes to your new SIPP. If they have no prefunding in place, you could be seeing gaps of upto 4 days between switches/sales/purchases.

Not sure I understand what you mean, but the BACS transfer was triggered on the Thursday whereas the sale of the cash-like fund units appeared to be done on Thursday as well, but using Tuesday's (lower) valuation.

Again, it comes down to prefunding.     The provider hasn't waited for the settlement period on the sale of units.  It is using its own money, at its own cost, to speed the process up.

My understanding of BACS is that the instruction is sent on the initiation date, but the sender's account is debited and receiver's account credited simultaneously 2 working days later. So I'm not sure if (like old times) the funds are in transit for a single day, unless I'm mistaken?

No. That isnt how BACS works.  If you, me or a business keys in a BACs payment now, it will leave your account today (either immediately or later in the day).  It gets to the receiving bank on the third working day unless it is the same bank.   CHAPS is same day for both ends.

Fair point, but is it an incentive to complete the transfer sooner rather than later, something of a rebate avoidance?

There is no incentive.  A tiny rebate isn't going to register in the scheme of things.   Especially when you consider the millions of pounds it costs the provider to operate prefunding.

Seeing it reflected on my account the next day is fine, but to also have a credit date of the next day when the funds were received a day earlier, is that also fine?

Yes, that is fine.  It requires hops from their account to your SIPP.    If your provider operated in real time, then it would appear in real-time.  If your provider operates with a single daily snapshot (typically overnight) then it would appear next day.

Basically, when I see the presence of leeway to "choose" between a few options and the flexibility to action such tasks retroactively, it is natural to doubt if the provider will choose options that are financially optimal for themselves, be it manual or automated.

They are not choosing.  They are just doing work, much of which is automated.   The sale and purchase of units is highly regulated.  If a provider was playing around with unit prices and dates they would be crucified by the FCA.

I haven't been able to find clear documented guidelines for either provider, aside from being quoted a generic 3-5 weeks timeline, and as it's only my first experience of a SIPP transfer and with all 5 points above turning out not in my favour, I just had to tap into the knowledge and experience of MSEs to learn and understand more.

That is because there are multiple methods of transfer.  Paper based, Origo and Altus.  But before you even get to that stage, the trades have to occur.  Then you have dealing times (typically once per day.  So, if instruction to sell was given today, it would happen tomorrow but the provider would not receive the money until 3 or 3 days later (depending on the settlement period).   Some providers prefund that gap using their money (yours appears to) to speed the process up.     Its usually the ones that also prefund tax relief (i.e. you get tax relief the same day you make a contribution.  Not 6 weeks later when the provider receives the relief).

intalex

Thank you @dunstonh for recognising that I am a newbie in this area and for sharing some knowledge over the reality of how investment switches and provider transfers work.

I think the choice of valuation dates on the following 2 trades fueled my suspicion:
1. Receiving written confirmation that a fund switch had been completed on a Friday, only for it to be completed on Monday at Monday's (lower) valuation (i.e. choosing a valuation point of 1 day later)
2. Seeing the fund units appearing right up to Thursday when the BACS transfer was initiated, but then seeing them sold using Tuesday's (lower) valuation (i.e. choosing a valuation point of 2 days earlier)

It just felt like the choice of valuation dates on both trades appeared random/selective rather than systematic.