Scottish Widows - Mercer master Trust Works Pension Question

horace972897

dunstonh said:

Was that selling and transferring in cash or in speccie?

You cannot transfer inspecie unless it is on the SW platform (which you say it isnt as the platform cannot have a professional administrator which means it has to be using insured pension funds).

Thanks, Dunstonh.

With regard to them using an adminstrator - you mention it means it has to be using insured pension funds - I was under the impression that insured pension funds may be 100% FSCS protected but couldn't get a straight answer on this from SW/Mercer. and their documents state:

"In the unlikely situation that a fund manager or company responsible for a fund that your Plan savings are invested in becomes unable to meet its financial obligations, you would not be covered by the FSCS. If this happened, the Mercer Master Trust administrator would make a claim against the fund manager or investment company in an attempt to recover the money. However, you could still lose some or all of the money invested in the fund."

Is it just pensions that have a life insurance cover and insurance based doesn't mean life insurance?

I ask as i wouldn't want to lose anything like 100% protection by transferring out. (Although if this was the case i assume they would make me take IFA advice)

dunstonh

However I've seen posts talking about weeks and months with Mercer. Which would be more so, unless the actual sell is close to the actual transfer (which is info I couldn't get out of the Mercer helpdesk.) (edit added the missing bracket)

Mercer are the administrator for many different schemes.  These range for COMPs/CIMPs to DB pension as well auto-enrolment and GPPs.

The involvement of Mercer will vary on the scheme.  Its matters massively on DB pensions as they handle all the administration but on COMPs/CIMPs.  On COMPs/CIMPs, they share the administration.  On GPPs it is also shared but moves more towards the provider.  On their own AE scheme then they handle everything.

So, when we say Mercer being slow, it really needs to be in context with the scheme in question.

With regard to them using an adminstrator - you mention it means it has to be using insured pension funds - I was under the impression that insured pension funds may be 100% FSCS protected but couldn't get a straight answer on this from SW/Mercer. and their documents state:

"In the unlikely situation that a fund manager or company responsible for a fund that your Plan savings are invested in becomes unable to meet its financial obligations, you would not be covered by the FSCS. If this happened, the Mercer Master Trust administrator would make a claim against the fund manager or investment company in an attempt to recover the money. However, you could still lose some or all of the money invested in the fund."

Insured funds get 100% FSCS protection.  Although there it is unknown whether it only applies to With Profit funds or includes internal unit linked funds (where the insurer is the fund house) or external funds (where the insurer mirrors a third party fund house).    It has never been tested and probably never will be and the FSCS wont clarify the position until an event occurs that requires them to.

The bit you have copied and pasted is not for SW GPPs/COMPs/CIMPs.   It is for Mercer's in-house auto-enrolment scheme.   Master Trust schemes are structred diffrently to insurance company based schemes.  (wary of creating a minefield of terminology when most of it wont apply).

If you are sticking to mainstream regulated unit-linked funds domiciled in the UK, then FSCS protection is largely irrelevant.

horace972897

dunstonh said:

The bit you have copied and pasted is not for SW GPPs/COMPs/CIMPs.   It is for Mercer's in-house auto-enrolment scheme.   Master Trust schemes are structred diffrently to insurance company based schemes.  (wary of creating a minefield of terminology when most of it wont apply).

If you are sticking to mainstream regulated unit-linked funds domiciled in the UK, then FSCS protection is largely irrelevant.

So are you saying i shouldn't worry about the protection level? (They say:

"Mercer Master Trust are covered by a long-term insurance contract which is protected by the FSCS." )

Would this be a protection that wouldn't mean i have to get IFA advice before transferring?

gm0

100% protection (FSCS) for insured fund versions  Does not trigger mandatory IFA advice.
It is a (small) legal difference over SIPP uninsured 85k FSCS protection.  As said upthread. Untested by legal fire with big fund managers or platforms going down.

To the original query.  Admin based active scheme "investment switching" isn't day trading and is often batched.  Transactions arrive a few days before a weekly or twice or more weekly process - volume and scheme dependent.  "netting" of purchases and disposals and member record keeping certainly used to occur.  With active schemes - monthly purchases are there to soak up sales.  Reducing costs for members.  

But this is not push button trading.  It's long term 30 year pensions admin workflow.  Expectations are what they are.  You make a request. It happens - after a few days.

Where trades do occur. They take +2 days to settle.  Prefunding is not universal. Processes and timescale targets therefore also allow for that possibility. In many cases.

BACS is slower than CHAPS or FPS.  And the cheapest one - often used for cash proceeds to move.  Is slowest.
There is a workflow step to issue the BACS (or other) payment to a valid (checked) destination.  After the trade settles. (if not prefunded).  Again for cost over speed.

5-10 days from submitting the request. Would be "normal" with a bank transfer and a trade settlement being 4-5 of it.  And some queuing up for the initial fund switch - 0-3 day workflow.  If a fraud check fires. And they contact you. It becomes dependent on you being responsive. And them handling said response (more workflow).

Selling to cash funds - also unitised. Doesn't do anything to speed up time out of the market. It adds more.  You are in your new "cash type fund".  The units are sold to actual cash for transfer. Settled. Transferred.  You make two switch/sales instead of one.  Worse.  

If it is a partial transfer.  Then the "default" may be to preserve asset allocation and sell across all.  So even if you prepared a cash fund amount.  They then sell both and move the amount and leave you with less equities and some cash units. Perhaps if they don't read the instructions to vary from the default.  

That happened to me.  They were bang to rights it was on my requests. But I just had to buy back in with the excess cash.  And not go on a 100 years war about it.  Investment switches were free. So while I could have been arguing losses caused by error and restitution.  In my case I wasn't.

My advice having done it - is relax.  One transaction.  Allow it to happen.  

Either instruct pulling platform for investment selection or watch carefully and DIY the trade when cash arrives and is allocated to your "new" account.

Where people often go wrong with this is they have an urgent date for tax free cash. Unrealistic expectations born of internet banking. Or they go away/have duff contact info.  And when they trigger an FCA mandated "checking for risk" process they didn't know existed - they are unavailable to clear it - and the process stops and goes into a wait state. Permanently.  Until they do.  The customer of scheme admin is often the scheme and its trustees for anything that isn't consumer DIY SIPP/personal product.  They want the FCA kept satisfied.  A higher priority than members having unmet and unrealistic expectations for once in a lifetime, once per member transactions - like sale and transfer out.  It *could* all be made super slick.  Universal prefunding to avoid trade settlement. Fast expensive transfers.  Tight SLA and staffing to match it.  At a cost.  Which nobody would like.

The visibility into admin workflow is often very poor with pension admin companies and life companies. Customser service front line often - don't have visibility and don't know. Pointless talking to them and logging a workflow ticket - to ask about a workflow ticket - that is inside the "normal" processing times and isn't even late.  Waste of everybody's time. 

horace972897

Both Dunstonh and Gm0 - you mention pre-funding 

Can you explain what that actually means in this scenario please?

Mercer/SW transferring to Scottish Widows/iWeb

horace972897

horace972897 said:

Both Dunstonh and Gm0 - you mention pre-funding 

Can you explain what that actually means in this scenario please?

Mercer/SW transferring to Scottish Widows/iWeb

Dunstonh Gm0 not sure if you saw this?

DRS1

horace972897 said:

horace972897 said:

Both Dunstonh and Gm0 - you mention pre-funding 

Can you explain what that actually means in this scenario please?

Mercer/SW transferring to Scottish Widows/iWeb

Dunstonh Gm0 not sure if you saw this?

You need to use an @ sign.  So @dunstonh and @gm0

By prefunding I think they mean you don't have to wait for the sale to settle before the transfer is made.

You usually see this with the basic rate tax reclaim you get on personal pension contributions.  With most SIPP providers you make a contribution and then wait days or weeks for the tax reclaim to show up.  With insurers you sometimes see the tax at the same time as the contribution.  Not because HMRC are quicker with insurers but because the insurers pre-fund it.

gm0

Yes for practical purposes the concept is as explained above.  Normally trades have to settle before there is cash.  To transfer it out or do anything else

Many providers and platforms will take investment switching or selling instructions depending on the scheme type and management arrangements. Not all are SIPP with buy/sell/limit orders direct to market. 

And in general the proceeds need to clear (trade settlement day+2) before they are available to do anything else.  Despite the market price having been set at execution (which may itself be a day or two after the request to do it) and also depite the very high probability of settlement occuring without issues for normal widely and exchange traded stuff - shares, unitised funds/etfs.  It is rare indeed for trades to get reversed.  It happens.  Where trades are cancelled in an IT problem/flash crash where markets have become rogue.  But a fairly extreme scenario.

Retail punters are not in general allowed to slipstream a load of sell, buy, sell orders based on proceeds unsettled in a "normal" pensions admin environment.  That's a daytrading account "on margin" type of deal where a credit line provides the "limit" for the gambling.  A different animal entirely

A small crossover occurs where "proceeds" of sales for exit are "prefunded" by the platform instead of waiting for settlement so the cash is available on the day the trade executes and transaction price is set.  Not two days later. 

This allows the "leaver" workflow to proceed to the cash transfer step immediately subject to ID and verification checks of destination account. It's hardly essential if you are then going to use the slowest form of BACS to move the money which some do as well.  Cheap.

The trade settlement clears up the prefunded amount a couple of days later.  

Prefunding for low volume transactions like transfer out isn't especially onerous.  And some do it.  It mildly increases their deployed capital at any given moment.

horace972897

Thanks @DRS1

Would this still be the case with a large pot. (Several hundred thousand.) ?

dunstonh

sorry, missed it pre-bump.     I see that it has mostly been answerwed.

Fund size does not impact on pre-funding.  If a provider offers it, then everyone gets it irrespective of their pension value.  With pension funds, its automatic.   Pension funds that start with the name SW and have a series number in them will be "pension" funds and will have prefunding.