I have a pension scheme with Standard Life UK where my employer contributes monthly. Currently money is invested in a BlackRock fund. It is an equity fund. I was wondering how does the switch between one fund to another works. Suppose I want to switch money from current fund A to fund B. I read that it takes 2 days to move the money and prices as of 2 days after the request are applied. But, what about the costs? Does anyone manage dynamically his/her pension fund by allocating money to funds based on personal expectations about future market moves? Are the switching costs low enough (or hopefully zero)? Thanks.
You have to read the fine print of the pension wrapper (Standard Life), and of the new fund you want to invest into to find out.
Typically here is were the fee feast could happen
- Standard Life could charge you a fee for the transaction (either a fixed amount or a percentage). How much depends on the pension product you are using.
- The new fund will typically charge you a fee when you buy units in the new fund. (They sell you the units at a premium to fair value). The premium depends on the fund.
So you can manage actively your pension pot. But if you choose to do so you need to be mindful of the fees you have to pay. You should better find a pension wrapper with low fees and find funds with low fees
If you change all your funds 4 times a year and you get a 1% charge each time, then you pay 4% of your assets. If your investments return for that year is 8%, then you wiped 50% of your return for that year!
Good luck with the reading