Does the fund choice affect the demutualisation payout?

NickC_4

Hello again.

To get the DM payment, you have to have a with-profits policy, but does it matter which funds the money is invested in?

I currently have a mixture of the "Pension Managed One Fund" and the "Pension Millennium With Profits Fund". Does this imply the first is not with profits, or is it just not in the name?

I'm guessing it doesn't matter, but if not, can you alter the investment funds to maximise the DM payment?

Thanks,

Nick.

ReportInvestor

Are you referring to any mutual in particular? You would be too late if shifting any funds at Standard Life.

If you are invested in the with profits fund of a mutual insurer you should be eligible for a windfall on demutualisation.

But would you want to invest in with profits at another company? You should certainly check out the particular fund and company very carefully first. Are they strong enough? With profits is an opaque form of investment where the strings are pulled by your company.

EdInvestor

Hello Nick

To get the DM payment, you have to have a with-profits policy, but does it matter which funds the money is invested in?

Yes

I currently have a mixture of the "Pension Managed One Fund" and the "Pension Millennium With Profits Fund". Does this imply the first is not with profits?

Yes.The Managed One fund money will not be eligible for a windfall.

Can you alter the investment funds to maximise the DM payment?


Too late now, I'm afraid.

dunstonh

I wouldnt switch money from managed one into with profits anyway. I wouldnt switch out of with profits either but I would consider switching the money out of managed into a much better spread.

Standard Life have a very good range of funds, both internal and external.

There is no charge to switch the managed one into other funds.

Edit by Pal: Possible financial advice removed.

NickC_4

Thanks dunstonh,

Given that I know very little about these things - how do I pick which funds to go for?

I don't mind some risk - I have a while to go before retirement, but on the other hand of course I don't want to end up with with no pension and having to start over again.

dunstonh

The managed one fund is a medium risk fund so you are already in the middle.

You can get fund switching form from standard life (or get an IFA to get it for you). You then list the funds you want out of and how much and then list the funds you want to go into.

The fund selection is quite wide and you should pick a range of funds and not just 1 or 2. The funds can contain high risk funds but limit the percentage to small amounts. The idea is to really pick a spread of investment areas across the risk ranges but average out the percentages into each to suit your risk profile.

I cannot pick funds for you on the forum. I have done it formally for a number of board members before (where i can issue correct formal documentation to confirm my status) and put in writing my recommendation (where the advice is solely limited to fund selection and arranging the switch). However, doing it on the board would be in breach of board rules and FSA rules. Someone may read my post and think that is what they should do and their risk profile is likely to be different to yours. Also, SL (in some cases) offer external fund managers in addition to their own fund range. These funds can often cost a little more. Some dont like paying more, some dont mind.

If you want to do it yourself, ask SL for a funds list and fund switch form. Pick 5-7 funds and spread it across them. The SL funds list does give a risk rating for each fund so you can see exactly what the risk is.

EdInvestor

Hi Nick

Click here to see the list of funds offered.

Standard's start at no 4358, scroll down.They show 1, 3 and 5 year performance.Of the internal funds. <Edit by Pal to remove possible financial advice>

"Equity income" funds are a good way if investing in shares IMHO, because the fund will choose ones which pay higher dividends - and the long term returns from stockmarkets all come from the divis, not from growth in the share price.

The property fund pays a good divi too.Both of these types of funds are often recommended for retired people, so shouldn't be a problem on the risk front.They would also fit together nicely with your WP fund money which is now likely to be about half in corporate bonds.

<Edit by Pal to remove possible financial advice>

bootman

I am in a Standard life managed one. I have looked at the above link and still none the wiser what I would switch to. I look at my pension on line and the managed one price is doing better at the moment than It has done for ages as far as I can see. My fund has lept £400 in value last week over 4 days. So would now be the right time to be switching?

EdInvestor

Hi bootman,

A managed fund is invested mainly in UK and some foreign shares, corporate bonds and commercial property.In many ways it is like a With-profits fund, but with no guarantees.The idea is to spread the risk around different "asset classes" so that if the stock market crashes, you won't get the full hit, as some of your money is in bonds and property (It's very rare for all these markets to crash at the same time).

There are more than 200 of these funds, every insurance company and fund manager has one, and the majority of investors end up in them (or in WP).

Click here to compare the Standard life version with the ones at other providers. <Edit by Pal to remove possible financial advice>

The problem with these funds seems to be that they tend to produce a rather ordinary overall performance. The parts do better than the whole, so to speak. So some people think it might be better to invest directly in the parts,but with the same proportions going to each asset class, so you still get the risk protection.

Managed funds like this are usually invested around 60 -70% in equities, 15-20% in property, 15%-20% in bonds, these percentages can be varied up and down depending on your level of risk.

Let's take a 60-20-20 split.

<Edit by Pal to remove possible financial advice>

You would also direct them to split up your new contributions 60-20-20 into the three new funds in the same way.

If you choose individual funds which each return better results than the mixture in the managed fund, you will have obtained the same risk protection as the managed fund gives, but much better performance for your money.

This is not advice, it's just some suggestions about how to get your pension money working harder for you.

<It is advice, which is why I have edited it! Pal>

bootman

Thank you Edinvestor,

My pension was recently moved from a GPP to a personal fund and as changed employers. So I am really out there on my own as far as help. When I have called standard life in the past they have always said unable to advise,so what would be the best route to take to do this and know I am doing it correctly.

My pot currectly stands at £40K with £700 a month being paid into it, from what you say and if I understad correctly it would still be a Managed One fund but within that fund I can choose diiferent bits to invest in.

dunstonh

My pension was recently moved from a GPP to a personal fund and as changed employers. So I am really out there on my own as far as help. When I have called standard life in the past they have always said unable to advise,so what would be the best route to take to do this and know I am doing it correctly.

If you dont want to do it yourself, the only option you have available to you, regarding standard life, is get an IFA to do it. As a paid up plan, there is no income stream to the IFA to cover the costs. If you are still paying into it, they can transfer the plan to their agency and get the approx 1% pm renewal commission. That should cover any fund only recommendations.