# When Pension Pot is out of the Market



## 149oaks (11 Nov 2012)

I'm wondering what happens in the following situation. I'm a deferred member of a Pension Scheme and the AVC part is being wound up. We were given options on what to do and I chose the option to let the Adminstrators use the default option i.e. transfer my existing money to what funds are they are now offering. I'm fine with this. However they tell me that my money will be out of the market for a "time" while they do all the admin. Without going in to why this can't be done seamlessly, I'm wondering where my money actually will reside for this length of "time". As it's a 6 figure sum and the total fund is approx €10m and I'm assuming it won't be lying as cash in a drawer who's going to benefit from the interest for this period of "time"? Am I correct that if my money is out of the market for a period of time I should benefit from any interest accrued if it's in an interest paying a/c? Otherwise isn't it in the interest of the Administrator to prolong this period of time if they benefit?


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## ClearFinance (12 Nov 2012)

Hi 149Oaks

Is the money moving from one life office to another or within the same life office? When you say the avc is being wound up is it going to a buy out bond. Is you main scheme defined benefit. Need a bit more info so I can determine an answer?


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## 149oaks (15 Nov 2012)

To answer the questions posed:
1. The Main Scheme is Defined Benefit, which is not being wound up.
2.The AVC scheme is being wound up and it's going to a buy out bond.
3. My existing AVC's are split between 2 Life Offices, but with the buy out bond they are going into 1 and it it 1 of the 2 that I'm currently in.
If you need any more info let me know. Thanks


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## ClearFinance (17 Nov 2012)

The reason for this is any life office completes transactions on a receipt basis. FOr example, I receive a letter today that the scheme is to be wound up, example 17/11/2012. This is the day the life office will use on their system as the surrender date. They wont do the transaction on this date but this will be the values date used. They may transfer this money via cheque to another life office on 25/11/12 for example based on how long it gets the administrator to complete the paperwork etc. 2nd life office receives the money and their investment date is 25/11/12 provided they have the required info to set up the policies. if they dont it could be a few days or weeks later before its set up. the money is in limbo for these days due to admin and nothing else. If they fund is 10m for example the life office will have to purchase units for the funds on the date of receipt and not earlier. does this answer your q?


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## 149oaks (17 Nov 2012)

Thanks clearfinance. I'm still a bit unclear from your reply. There are 2 transactions so lets take them in turn.

1. 1st life office use a surrender date but wait to do the transaction. Why do they wait? If they wait they are taking a risk/gain punt until they write the cheque, which I find strange. Does it really work like this, or would they do the transaction on the surrender date, lodge the proceeds for a few days/weeks whilst they the administrators do the "paperwork" and benefit from the interest accrued?

2. 2nd life office receives the "cheque" - really a cheque? Then you say that if they don't have the required info set up the money could be in "limbo" for a time, again I find this strange - it's hardly sitting in somebodys drawer in cash is it. Somebody has to be benifitting.

Seems to me there is ample opportunity for Administrators and life Office's to benefit in this process with the members money. As I said in my original mail it's in their interest to prolong the process. 

The jist of this is are the Administrators and life Offices obliged to act in the interest of the Pension Consume at all times?


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## ClearFinance (18 Nov 2012)

I work in one of the biggest life offices in Ireland, so I have first hand experience of these transactions. For example, if you wind up a scheme with 100 policies, this can take weeks depending on the system of the company. As you say its 10m, no way could this be done in one day and sent across. Unit pricing departments buy units on the day the money is received. You cant expect a life office to buy 10m worth of units when they dont have the money. The co I work for do not do electronic transfers but even if they did you could be talking 3 days for that to clear in another bank account which is 3 days of the money not being invested for starters. The thing is there is no interest accrued on anything. Its not invested in bank account earning the money. If your surrender date is a particular date then the day someone does the surrender on the system, the money is ready to be moved. All transactions are backdated to a receipt basis so nobody benefits from it being in limbo. I understand where your coming from though. Think of it this way say the money moves to Irish Life and there is 100 buy out bonds, that could take an office a week to set up, check, issue docs etc. But it will be backdated to units bought on the day of receipt. You should keeo an eye on teh dates involved and find out why something is delayed, you would be surprised how things can drag out by someone not sending in the required paperwork. SOrry for the long winded reply, prob doenst still answer your question fully.


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## 149oaks (18 Nov 2012)

Clearfinance thanks for your reply. 
As an "insider" you can certainly see and understand how it works at the coalface but when you stand back it simply doesn't make sense that my money will be out of the market for a time (unspecified) and nobody gains. I have never trusted the financial services business and this is another example of how they don't have systems in place for the consumers benefit (e.g. 3 days for money to clear), why does it take Life Offices so long to do their work - thats their business - to serve the customer, and they are well rewarded for it - fees, management charges etc.
Has anybody else any views on this or is it another example of what we meekly accept as the system being set up and ran to screw the ordinary joe soap so the fat cats can continue to lick the cream? Clearfinance I understand you may be just a cog in the great corporate wheel of this so please don't take my rant personally.


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## ClearFinance (24 Nov 2012)

The reason anything takes time, systems, paperwork, compliance regulation money laundering etc. Unfortunately systems are not set up to do all this in one day. for example, why does it take a bank 3 days to clear a cheque? politics, paperwork, and also volume of work. By the way you may not be disadvantaged as the day your units are bought, they may be cheaper on the day you transfer that any other day. Also it wouldnt be out of the market if your trustees kept it in the same life office.


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## Investor (24 Nov 2012)

If I was you I would put all retirement money into a SIPP where possible that way you can control what you do with it


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## 149oaks (26 Nov 2012)

Thanks for the responses though I'm surprised at how little comment there is. I'd like to keep the point specific - are there any regulation/rules regarding how long money is out of the market and who benefits from any gain it acquires when it is out? I don't want to go off point regarding why it takes time or where one should put it. They are separate topics and not specific to my query. Thanks.


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## Baracuda (26 Nov 2012)

C.finances may correct me on this but when a company surrenders units belonging to a client the monies are moved into a current account and a cheque is wrote out against this, this cheque is then posted to the new life office/administrators/broker (one or two days out of the market and cannot be helped and I think from memory that a life office has upto 5 working days to action a client request) 

Both life offices have to work within the regulations set out by the CBI and must ensure that all relavant paperwork is fully in order before they can set the price date so providing all relavent paperwork is in order the new life office uses the price date they receive the cheque to buy units...simples and no loss to the client!

The life office that wrote the cheque may or may not have an interesting bearing client account and may benefit from any delays(?)


In my experiance however some life offices/administrators/brokers are better or perhaps quicker at this than others so there is room to improve in some cases no doubt. So should there be a delay in paperwork arriving or incomplete paperwork then I would request the life office/administrator/broker to cover any loss as a result.


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