Saturday, 3 February 2007

Switch your equity SSIA to cash if you're getting out soon

The vast majority of SSIAs will be maturing in April 2007, the final month of the scheme. A portion of these (admittedly not a huge portion) are equity-based Managed Fund SSIAs. If too many of these equity-based SSIAs are actually cashed in at the same time, it may cause a dip in the funds or cause the fund manager to impose a Market Value Adjuster (MVA) - a sort of penalty for cashing in at that point. Some SSIA providers have already done so.

To avoid this possibility, I'd recommend that equity-based SSIA holders who intend to cash in during April 2007 should ask their provider if they can switch funds now to cash to avoid such a penalty. You may miss out on any fund growth during the final months, but you'll certainly miss the penalty.

Of course the alternative is to defer cashing in your SSIA for a few months.


Tom said...

Is there any obligation on the fund manager to 'lift' or reverse the effect of the Market Value Adjuster after some period? Hibernian hit their Irish Equity fund unit price with a 2.9% downward adjustment in February. Their support people couldn't say whether the 2.9% would or would not be restored at any point.

Liam D. Ferguson said...

Hi Tom. Sorry - only noticed this comment now as I only visit my own blog at infrequent intervals. Unfortunately fund managers have a lot of discretion in the management of funds, and so are under no obligation to lift the MVA at a particluar time. However, it is likely that they will lift it when the monies coming in to the Irish Equity Fund catch up with monies going out.