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.
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2 comments:
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.
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.
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