Stuart MacDonald 6 March 2019
At HL, you have access to two classes of funds, unbundled and inclusive. Unbundled funds will usually have lower annual fund charges and low, or no loyalty bonuses. They’re the newer version. Inclusive funds on the other hand usually have higher annual fund charges, but higher loyalty bonuses.
If you bought funds before 1 March 2014 they’re probably inclusive funds. Most of them are now available as unbundled funds.
You can compare the charges and savings for each version on the factsheets.
Otherwise you can log in, choose the account you want to view, and click ‘Account Administration’ and ‘Convert my funds to new unit types’. Here you’ll find a list of inclusive funds you hold and a comparison of the charges.
How do I convert?
The easiest way to convert your funds is online, but you can do it in writing too. You don’t need to convert all your funds, you can choose to only convert one or some or not at all if you prefer.
Once you’ve given us your instruction you can continue to trade in your inclusive fund or cancel the conversion at any time, as long as your order is still ‘pending’ and hasn’t been submitted to the fund groups. You’ll stay invested throughout this process, so you’re not out of the market.
There are no charges to convert and HMRC has confirmed that conversions don’t count as disposals for capital gains tax purposes.
If you aren’t registered for our online service you can register now.
When will my conversion happen?
We place conversion instructions on a quarterly basis in March, June, September and December. We expect to submit the next round of conversion instructions to the fund groups on Saturday 16 March. If you would like to submit a conversion instruction this quarter you will need to provide your instruction before 5pm on Friday 15 March.
What happens during a conversion?
Once your instruction’s been passed on to the fund group you won’t be able to buy or sell units in the inclusive fund for about two weeks.
You can check the progress of your conversion and cancel a pending order from within the ‘Pending orders’ tab of your online account. While the conversion is going through you can still buy the unbundled version (but not to the inclusive class) of any units you’ve asked us to convert.
The conversion itself won’t affect the value of your holding. But because unbundled units usually have a different price to the inclusive units, you’ll have a different number of units after the conversion has completed. Your confirmation letter will show all the details, as well as the conversion ratio that’s applied.
Please note: once the conversion has taken place, you can’t convert back to inclusive units. As a result of the conversion, any future loyalty bonus payments you get on your new fund holding must be reinvested in further fund units. You can’t withdraw this as cash or use it to cover fees (the platform fee to hold funds is a maximum of 0.45% a year). This is because the regulations around loyalty bonuses changed in 2014.
If you’d prefer not to convert your holdings you can switch from one class of fund to another (e.g. inclusive units to unbundled units), online, by post or by calling us.
A switch is a sale and repurchase. The sale will normally be placed by the end of the working day following receipt of your instruction. The purchase will normally be placed by the end of the following working day. The advantage of switching is that you’ll avoid the time where you can’t sell your units.
While we don’t charge you to switch, it’s important to be aware that a bid-offer spread or dilution levy could apply. That could affect the value of your investment. You’ll also hold cash while the switch takes place so you won’t benefit from growth in the market until your money is reinvested.
If your funds are held outside an ISA or SIPP, there’s the risk that switching could create a capital gains tax liability.
Tax rules can change and benefits depend on personal circumstances. This article isn’t personal advice. If you're not sure about what’s right for you, please seek personal advice. All investments can fall as well as in rise in value so you could get back less than you invest.