Reminder - convert your Bond funds to "clean" funds now.

Just did some start of year cleaning on my brokerage accounts and converted all my funds - including some bond funds - to "clean" funds i.e. stripped of trail commission charges, following the introduction of the Retail Distribution Review rules.

For Sippdeal/YouInvest instructions are here
http://www.youinvest.co.uk/CleanFunds/
and the comparison between old and new funds is here: http://www.youinvest.co.uk/Resources/Content/PDF/AJBYI_Clean_funds_reference_list.pdf

Recommend you do the same. Most of my holdings are direct but it would irk me to pay over the odds for my few funds.

Comments

  • Thanks very much for posting the information. I was wondering about that.
  • I understand that for new fund purchases providers must have clean funds by 6th April 2014 but there is no obligation to move existing customers until 6th April 2016.

    I use Selftrade and Hargreaves Lansdowne and neither appears to have announced their new fund charging yet

    Reading some of the commentary on Hargreaves Lansdowne, it seems that if you continue in an old style fund with a 1.5% AMC they may give the whole of their 0.75% trail commission back to the customer so you effectively get the same deal as switching to a clean fund at 0.75% AMC. The flip side seems to be they may introduce an annual percentage charge on the total value of your funds held with them, possibly around 0.6%

    So you will save 0.75% on your individual fund charges but pay an extra 0.6% on your account as a whole giving a small net saving.
  • @Frugal. Though not strictly relevant to this forum about bonds, I was wondering something similar about YouInvest. If one continues in an existing fund that was purchased 'dirty', do they continue to give back the trail commission as before?
  • I'm not a youinvest customer but the documents attached above suggest they will levy a clean fund charge of 0.2% which doesn't apply to the existing "dirty" funds, but they don't say how much of the higher AMC for dirty funds they will rebate (if any).

    I'm guessing for most providers it will be worth switching to clean funds, but looks like they are all doing slightly different things and the savings may not be as high as the difference between a 1.5% AMC and a 0.75% AMC and that for some there could effectively be no difference if they rebate all commission on the old style funds.



  • @frugal. Thanks for looking at the document. As you say, not entirely clear.
  • For many years my wife has had a direct investment with InvescoPerpetual in their Corporate Bond Income shares (Sedol 3305069) with AMC of 1.0%. YouInvest's table suggests the Clean fund equivalent is the Z class income share (Sedol B8N4509) AMC 0.5% (the difference is worth about £90pa to my wife). However, on enquiry InvescoP say (a) the Z class is available only to institutional investors (b) the 'no trail' class available to retail investors like my wife has an AMC of 0.75% (c) that no trail class would have to be invested through a broker (who I believe would inevitably charge fees one way or another).
    Feels a bit "Catch 22". Am I missing something ?
  • Something else which may tip the balance in favour of "Clean" funds is that HMRC have decreed that, from the start of the current tax year, commission rebates are taxable. It's to their credit that Youinvest have made their position clear and switched now rather than waiting to be be forced by the new rules.
  • @Tightwad....the only problem being: it's doubled the running costs on my small investment.
  • I've received an email today from Lloyds Bank Direct Investments to say that over the next few months they will automatically convert the Funds in my ISA to the corresponding clean classes. Actually the only Fund I have with them is the Invesco Perpetual Corporate Bond Fund referred to by HB1. Still, I look forward to the saving, and the policy announced by Lloyds seems good.
  • Hargreaves Lansdowne have announced there will be a 0.45% annual account charge once the clean funds come in (for portfolios up to £250k). Haven't announced the exact charge per fund yet but say the average clean fund will have an AMC of 0.65% and existing "dirty" funds will have a loyalty bonus refunded of at least 0.75%.
  • Further to my message of January 10, Lloyds Bank have today advised that they have converted my Invesco Perpetual Corporate Bond holding to the "clean" Z Class, with a yield 0.5% higher.
  • It is extraordinary that they are allowed to introduce new charges negating the majority of the benefits of clean funds. They really want their cake and eat it! Greedy ***tards!
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