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Fund changes

What's changing?

The Financial Conduct Authority have introduced new regulations to simplify and increase the transparency of the charging structure within funds. After 6th April 2014, platforms such as Lloyds Bank Direct Investments will be unable to receive trail commission from Fund Managers for new investments. From this date you will be unable to invest new cash into funds which pay trail commission through Lloyds Bank Direct Investments.

As a result of these changes, Fund Managers have started to set up new share classes of existing funds. These new share classes contain the same investments however they no longer pay trail commission. These are commonly known as 'clean' or 'non-trail bearing' funds. The annual management charge of these funds will typically be lower than their 'trail bearing' counterpart.

  1. What will happen to my existing fund(s)?

    If the annual management charge of the new share class is equal to, or less than, that of the current share class, we will automatically convert your fund to the 'clean' version by 1 April 2016. This will ensure that you're investing in a fund which has a simple, transparent charging structure. All conversions will be done free of charge.

    If you have a regular investment set up in a fund which pays trail commission then this will be automatically transferred to the 'clean' equivalent once the conversion is complete. From 31st March 2014 a £2 commission charge will apply for each fund purchased through a regular investment plan. All dividends will also be paid from the new share class following conversion.

    If the annual management charge of the 'clean' share class is higher than your current version, or there is no 'clean' share class available, then from 6th April 2014 you will no longer be able to invest new cash into the fund. Any regular investments you have set up will be cancelled. Your regular subscription will be unaffected so you'll need to go online and review/amend your subscription plan accordingly. Please note that you will be able to sell your fund at any time.

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  2. When will my fund(s) be converted?

    We offer access to over 3,000 funds so the conversions will take several months. We'll be in touch to let you know when your fund has been converted – if you hold more than one fund, these may be converted at different times so you'll receive a confirmation letter for each one.

    If you'd like to find out the new share class of your fund in advance, we have put together a conversion guideOpens in a new browser window. We will update this document with the planned conversion date of each fund as it becomes available. We’ll be updating this document regularly so if you can’t see your fund, or if the conversion date of any of your funds is unavailable, it will be updated by 1 April 2016.

    Please note that during conversion there will be a short period of time (approximately 10 days prior the conversion date) when the online trading facility will be unavailable. This will only apply to the funds we are converting at that time. If you wish to sell a fund and find that you are unable to do so online, please contact us by phone.

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  3. Can I opt out of conversions?

    If you do not want your fund(s) to be converted, you have a number of options:

    • Option 1 - Sell your fund and receive the proceeds.
    • Option 2 - Notify us that you are arranging a transfer to another provider. You will be able to transfer your funds free of charge until 5th April 2014.
    • Option 3 - Withdraw the fund from Lloyds Bank Direct Investments and hold it directly with the Fund Manager.

    You can sell your fund online in the usual way. If you choose to transfer or withdraw your funds, please contact us as soon as possible as we will be starting conversions in late January.

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  4. Will I be liable for Capital Gains Tax when my fund is converted?

    No, HMRC has confirmed that conversions will not be subject to Capital Gains Tax.

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  5. What is a share class?

    Some Fund Managers offer investors different types of shares, known as share classes. Most funds will have at least two share classes (an income and an accumulation version) which allow investors with different strategies or objectives (in this case, income or growth) to invest in the fund. Each share class will contain the same investments however they may have different fees and expenses.

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  6. What is a trail bearing fund?

    A trail bearing fund is a fund which, quite simply, pays trail commission.

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  7. What is a non-trail bearing ('clean') fund?

    A non-trail bearing (or 'clean') fund doesn't pay trail commission so it generally has a lower annual management charge than its trail bearing equivalent.

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Our Share Dealing service does not provide advice so if you are in any doubt about making your own investment decisions we recommend you seek advice from a suitably qualified financial adviser. Please remember the value of an investment and the income from it can go down as well as up and you may get back less than you originally invested.