Prefunding switches on ARC, One Retirement and Retiready

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With Aegon Retirement Choices (ARC), One Retirement and Retiready, when you ask us to switch investments we don't wait to receive cleared funds before we instruct the fund manager(s) to buy your new fund(s). Instead, we'll place the instruction to buy your new fund(s) when we receive confirmation of all the sale prices from the fund manager(s) of the fund(s) you're switching out of.

The value of an investment can fall as well as rise and isn’t guaranteed. You could get back less than you originally invested.

Changing your investments could effect the final outcome of your savings. For advice as to whether a fund is suitable for you, please speak to your financial adviser.

You’ll benefit from a faster end-to-end switch journey and potentially be out of the market for less time.

No, you don’t need to do anything. We’ll process your switch instruction for you. If the instructions of your switch aren’t clear, we’ll contact you or your adviser to discuss.

We’ll place buy instructions for a switch request on receipt of confirmation of sell prices, and prefund the purchase where the receipt of sale proceeds will be after the point the purchase proceeds are due. This includes when:

  • the switch is a linked trade - the sell and buy are made as part of the same switch request;
  • the switch is an automatic switch performed due to rebalancing, and
  • the switch is performed to move out of a Lifestyle funds growth stage to the glide path stage.

Yes, we won’t apply prefunding for:

  • when you sell a fund and leave the proceeds in the cash facility;
  • when you buy a fund from cash held in the cash facility;
  • purchasing of investment trusts or equities through our Winterflood trading portal, or
  • where we're automatically purchasing units from a contribution or payment.

When we receive confirmation of the sell price of the fund you’re switching out of, we’ll place the trade to buy your new investment at the next valuation point.

A lot happens behind the scenes for any trading activity. When we receive your switch instruction, we contact the fund managers involved to sell your investments at the next valuation point.

The fund manager will usually be able to tell us the price for the sale the next day with the proceeds of the sale arriving with us three days later. When we receive confirmation of the sale price we can then send a buy instruction to the new fund manager as we know how much money is available.

Again the fund manager will usually tell us the price of the units to be bought the next day with money being sent to them three days later (which is a day after the proceeds from the sale have been received). Prefunding is required where we need to send the money for the sale before we have received the proceeds of the sale.

This can sometimes take a few days, but with prefunding this will happen quicker.

For example, there can be a discrepancy from when a fund manager pays the proceeds from the sale and when a fund manager requires proceeds to fulfil the purchase of the investment.

  • If a fund manager selling units from your fund pays out within four days, but the fund manager buying the investment requires settlement within two days, there's a discrepancy.
  • In this circumstance, we’ll make sure sufficient funds are available to purchase your new investment so there’s no delay and you’ll be out of the market for less time.

The settlement period is specific to each fund, but in general insured funds have a two day settlement period and open-ended investment companies (OEICs) have a four day settlement period (but some funds can be longer).

Yes, you’ll see a transaction on your account when we place the instruction to sell and buy your new investments.

When we prefund the purchase you’ll see your cash facility balance reduce, and the balance may become negative. Don’t worry, this is just to reflect that we’re waiting on the proceeds for the sales to arrive. This doesn’t affect the value of your wrapper.

No, you can’t opt out of prefunding. Please contact us if you want to switch and withdraw funds at the same time.

Here’s an example to show how this might work in practice.

Example of how a negative balance might work
Cash in cash facility £1,000
Fund A value £49,000
Total value £50,000
  • A switch request is made to switch £5,000 out of Fund A and into Fund B;
  • Fund A settles funds within four days, and
  • Fund B requires settled funds for the purchase of the investment within two days.

On receipt of the confirmation of the sell price from the fund manager of Fund A, we place the buy instruction with the fund manager of Fund B to buy £5,000 worth of units in Fund B.

On the account the transaction will put the cash facility balance to -£4,000, and there will be a pending transaction for the total switch amount of £5,000. So although there’s a negative cash balance shown as -£4,000, the value of the product would still show as £50,000.

On receipt of the sell proceeds from the fund manager of Fund A the transaction will reverse the position and the cash balance will return to £1,000, assuming no further cash has been added to the cash facility between the placing of the switch and receipt of the cleared funds from the fund manager