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  • FIRST POST
    • northbob
    • By northbob 8th Oct 16, 6:15 PM
    • 53Posts
    • 7Thanks
    northbob
    What are these SIPP fees?
    • #1
    • 8th Oct 16, 6:15 PM
    What are these SIPP fees? 8th Oct 16 at 6:15 PM
    My investments are with AJ Bell but a check on CompareFundPlatforms shows I can save on charges elsewhere. I will split investments between platforms (FSCS compensation limits same as prudent to split savings in bank accounts).

    iWeb come out best value on all ISA, SIPP, and unwrapped but I want to decide which to transfer to iWeb, and which to place with the 2nd or 3rd most cost-effective.

    Can anyone explain what these charges by various platforms are for so I can decide whether they may be relevant to me:

    Setup Income Drawdown
    Setup Capped Drawdown
    Setup Flexible Drawdown

    Annual Flexi Access Drawdown Charge
    Annual Drawdown Charge
    One-Off Withdrawals Charge
    Calculate Income Limits Charge
    Income Payment Annual Charge

    Thank you.
Page 1
    • zagfles
    • By zagfles 8th Oct 16, 6:33 PM
    • 11,121 Posts
    • 9,141 Thanks
    zagfles
    • #2
    • 8th Oct 16, 6:33 PM
    • #2
    • 8th Oct 16, 6:33 PM
    It looks like an out of date charge list as it mentions capped drawdown, calculating income limits etc. Those don't apply anymore since the "pension freedoms".
    • dunstonh
    • By dunstonh 8th Oct 16, 8:45 PM
    • 85,148 Posts
    • 50,158 Thanks
    dunstonh
    • #3
    • 8th Oct 16, 8:45 PM
    • #3
    • 8th Oct 16, 8:45 PM
    I will split investments between platforms (FSCS compensation limits same as prudent to split savings in bank accounts).
    You dont need to split across platforms. You just need to ensure you dont place more than £50k with any one fund house. (With personal pensions you dont have to split at all as they have 100% FSCS protection with no upper limit. SIPPs are limited by investment FSCS levels).

    Can anyone explain what these charges by various platforms are for so I can decide whether they may be relevant to me:

    Setup Income Drawdown
    Setup Capped Drawdown
    Setup Flexible Drawdown

    Annual Flexi Access Drawdown Charge
    Annual Drawdown Charge
    One-Off Withdrawals Charge
    Calculate Income Limits Charge
    Income Payment Annual Charge
    Capped and flexible drawdown still exist. However, only to those that were on those prior to April 2015. Flexi-Access, which started after April 2015 will be the option available to you if you are not already in drawdown.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • blobby8
    • By blobby8 8th Oct 16, 9:43 PM
    • 833 Posts
    • 1,346 Thanks
    blobby8
    • #4
    • 8th Oct 16, 9:43 PM
    • #4
    • 8th Oct 16, 9:43 PM
    My investments are with AJ Bell but a check on CompareFundPlatforms shows I can save on charges elsewhere. I will split investments between platforms (FSCS compensation limits same as prudent to split savings in bank accounts).
    Originally posted by northbob
    Is that right? If so, what are compensation limits on pensions ?
    • dunstonh
    • By dunstonh 8th Oct 16, 10:32 PM
    • 85,148 Posts
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    dunstonh
    • #5
    • 8th Oct 16, 10:32 PM
    • #5
    • 8th Oct 16, 10:32 PM
    Is that right? If so, what are compensation limits on pensions ?
    Originally posted by blobby8
    Stakeholder pension: 100% of the value with no upper limit
    Personal pension: 100% of the value with no upper limit
    SIPP: upper limit of £50,000 on SIPP provider

    Investments within a SIPP subject to the appropriate rules for that type of investment. e.g. shares, ITs and ETFs = no FSCS protection. UT/OEICs - £50k per fund house.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • northbob
    • By northbob 9th Oct 16, 9:18 AM
    • 53 Posts
    • 7 Thanks
    northbob
    • #6
    • 9th Oct 16, 9:18 AM
    • #6
    • 9th Oct 16, 9:18 AM
    You dont need to split across platforms. You just need to ensure you dont place more than £50k with any one fund house. (With personal pensions you dont have to split at all as they have 100% FSCS protection with no upper limit. SIPPs are limited by investment FSCS levels).


    Flexi-Access, which started after April 2015 will be the option available to you if you are not already in drawdown.
    Originally posted by dunstonh
    Stakeholder pension: 100% of the value with no upper limit
    Personal pension: 100% of the value with no upper limit
    SIPP: upper limit of £50,000 on SIPP provider

    Investments within a SIPP subject to the appropriate rules for that type of investment. e.g. shares, ITs and ETFs = no FSCS protection. UT/OEICs - £50k per fund house.
    Originally posted by dunstonh
    Thank you dunstonh,

    Is there no added protection from splitting what is essentially ones life savings between platforms? is there nothing that can happen with a platform (whether accident or fraud which escapes the regulators radar)? I am not thinking the £50,000 itself will help much - it wouldn't if everything was lost - but at least if any one platform only controls 50% or 30% of your life savings, is that not a better if the additional platform costs were worth it for the peace of mind?

    Also what is the position with funds that are not invested, but are in cash, for example after selling investments? If that cash is subject to loss, institutional failure (the bank, or a third party between the bank and the platform, or the platform, or fraud anywhere along the line) what compensation covers this?

    I have not started drawdown - it may be some years yet - but I don't want to transfer to a platform to save money now but be hit by steeper fees when I start drawing from the SIPP.

    So only 'Flex-Access' now applies. Does that mean the 'Setup Flexible Drawdown' fee is a consideration, or are 'Flex-Access' and 'Flexible Drawdown' and 'Annual Flexi Access Drawdown Charge' all something different?

    So if understand correctly on the various fees across various platforms:
    Setup Income Drawdown - ignore (not applicable)
    Setup Capped Drawdown - ignore (not applicable)
    Setup Flexible Drawdown - ?

    Annual Flexi Access Drawdown Charge ?
    Annual Drawdown Charge ignore (not applicable)
    One-Off Withdrawals Charge - what is this, is this still valid?
    Calculate Income Limits Charge - what is this, is this still valid?
    Income Payment Annual Charge - what is this, is this still valid?

    Thank you.
    • zagfles
    • By zagfles 9th Oct 16, 9:47 AM
    • 11,121 Posts
    • 9,141 Thanks
    zagfles
    • #7
    • 9th Oct 16, 9:47 AM
    • #7
    • 9th Oct 16, 9:47 AM
    The platform is only the middleman, it depends on the total holdings with the relevant institution. For cash, platforms tend to spread cash amongst several banks and AIUI your protection would depend on total investments with that bank (whether through a platform or not).

    See for instance http://www.hl.co.uk/investment-services/vantage-service/how-safe-is-your-investment
    • dunstonh
    • By dunstonh 9th Oct 16, 12:19 PM
    • 85,148 Posts
    • 50,158 Thanks
    dunstonh
    • #8
    • 9th Oct 16, 12:19 PM
    • #8
    • 9th Oct 16, 12:19 PM
    Is there no added protection from splitting what is essentially ones life savings between platforms?
    Not really. The link quoted in the response above explains it more.


    So only 'Flex-Access' now applies. Does that mean the 'Setup Flexible Drawdown' fee is a consideration, or are 'Flex-Access' and 'Flexible Drawdown' and 'Annual Flexi Access Drawdown Charge' all something different?
    There are three types of drawdown (ignoring variations such as phased).
    Capped Drawdown
    Flexible Drawdown
    Flexi-access drawdown.

    Capped and Flexible are only available to people that are already on those methods. They remain on those methods until and if they decide to switch to flexi-access. There are some advantages to sticking with the older regime for some people. However, if you are not already in one of those drawdown methods, you cannot use them. You only have flexi-access available to you. So, you can ignore things specific to capped or flexible drawdown.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • northbob
    • By northbob 9th Oct 16, 9:28 PM
    • 53 Posts
    • 7 Thanks
    northbob
    • #9
    • 9th Oct 16, 9:28 PM
    • #9
    • 9th Oct 16, 9:28 PM
    Thank you dunstonh, and zagfles for the link.

    Can I ignore the fees for these for those platforms that list them?
    One-Off Withdrawals Charge
    Calculate Income Limits Charge
    Income Payment Annual Charge

    These sound like optional services in any case, although it is hard to judge if it is a fee that should be factored in to deciding best overall value without knowing what it relates to.
    • Linton
    • By Linton 9th Oct 16, 9:44 PM
    • 6,957 Posts
    • 6,550 Thanks
    Linton
    Thank you dunstonh, and zagfles for the link.

    Can I ignore the fees for these for those platforms that list them?
    One-Off Withdrawals Charge
    Calculate Income Limits Charge
    Income Payment Annual Charge

    These sound like optional services in any case, although it is hard to judge if it is a fee that should be factored in to deciding best overall value without knowing what it relates to.
    Originally posted by northbob
    Most platforms charge for actually sending the money out - payments can be made on ad hoc one off basis or regularly as yearly or monthly payment. The Income Limit refers to the old rules and so is not applicable to you.
    • northbob
    • By northbob 10th Oct 16, 7:04 AM
    • 53 Posts
    • 7 Thanks
    northbob
    Most platforms charge for actually sending the money out - payments can be made on ad hoc one off basis or regularly as yearly or monthly payment. The Income Limit refers to the old rules and so is not applicable to you.
    Originally posted by Linton
    Fund platforms charge to let you access the money in your SIPP?!

    Looking ahead I planned to take out 3-4% p.a if that withdrawal rate looks sustainable at the time, which would be one withdrawal of around £9,000 p.a. If there is a £100 fee each year, that's over 1% - half a weeks worth of income - to access the money each year! If I opt to take an initial lump sum then I will withdraw 3-4% of whatever remains as a single payment in subsequent years, in which case the proportion lost to annual withdrawal fees will be even higher. Annual charges for withdrawing money from the SIPP will be an important consideration.

    What is the process for withdrawing money - do I not just sell the necessary amount of funds and make a cash withdrawal in the same way as from a share dealing account then declare the income in the appropriate parts of my self assessment tax returns? Or is it more complicated than that?
    • bowlhead99
    • By bowlhead99 10th Oct 16, 7:45 AM
    • 5,146 Posts
    • 9,076 Thanks
    bowlhead99
    Fund platforms charge to let you access the money in your SIPP?!
    Originally posted by northbob
    Yes. It is not your money. The money is inside a designated tax-protected pension plan belonging to the pension trustee. You are just a beneficiary of the trust, although the 'self invested' nature of this type of pension plan allows you to make investment decisions as long as they relate to types of assets sanctioned by the trustees.

    With a 'traditional' pension 'back in the day' you would just sell all the investments and buy an annuity which would spit out cash at a predetermined rate at regular intervals which would be sent to you, and the cost of administering that was built into the annuity rate/price.

    However, with flexible drawdowns, every time you decide to do one at your own whim, someone needs to sign off that it is in line with scheme rules, approve making a distribution from the trustee to the beneficiary, calculate what if any of it comes from tax free lump sum, report to HMRC, do a PAYE deduction based on your tax code and pay over to HMRC etc etc. There is infrastructure and systems and compliance departments in the background which has to be paid for (as well as marketing and compliance to even get you as a customer in the first place). There is no particular reason this should be free (other than market competition).

    Annual charges for withdrawing money from the SIPP will be an important consideration.
    True. But you have said that drawdown is several years away. As such, the more important consideration is really just the 'transfer out' charge, because once you actually get to the stage when you want to start drawdown, you can move to whoever has a good overall deal for doing that (and administering the remaining pot) at the time.

    You are using platform comparison tools now to find out who is competitive, and you will probably find they have changed a bit since when you first started using your current provider. You could expect they would change again over the next decade. So, while it's good to understand the concepts, a fee for a service you don't want for a few years is probably not the be-all and end-all.

    What is the process for withdrawing money - do I not just sell the necessary amount of funds and make a cash withdrawal in the same way as from a share dealing account then declare the income in the appropriate parts of my self assessment tax returns? Or is it more complicated than that?
    From your side it should be straightforward clicking to get to your money. The complexity about it being a pension wrapper rather than a simple instant-access shares account will happen in the background.

    However, you are receiving taxable income and these distributions are covered by the PAYE system. Generally you would have an appropriate real-time tax code on your 'main' source of income, and then your income from your various pensions would just get be on an appropriate 0, 20, 40, 45% rate - so you would have a deduction at source. And then it can get fine tuned as you say when you include the income in the right part of your self assessment return at the end of the year. You don't just pull out the £9k and then wait to the end of the tax year to tell them that you need to pay tax on it.
    • zagfles
    • By zagfles 10th Oct 16, 7:48 AM
    • 11,121 Posts
    • 9,141 Thanks
    zagfles
    Yes you need to take into account any withdrawal fees, and this could make a significant difference to the overall charges. Not all platforms charges, HL don't for instance.

    The process is a bit different from a withdrawal from say an ISA, as with a pension income is taxed so the platform need to run PAYE, you'll get a tax code etc like you do for a job. Often find that one off withdrawals are overtaxed and you get the tax back over the year, or have to reclaim it from HMRC, like if you get a big bonus at work.
    • dunstonh
    • By dunstonh 10th Oct 16, 11:32 AM
    • 85,148 Posts
    • 50,158 Thanks
    dunstonh
    Fund platforms charge to let you access the money in your SIPP?!
    Not all. Some do. Some don't. There is actually quite a bit of difference in the charging methods of IFA providers and DIY providers on this front.

    The DIY side seems to focus more on getting cheap headline charges (i.e. the x% a year) but then charge explicitly for most admin tasks that get carried out. The IFA side tends to have as close to mono charged structures as possible. i.e. just the x% a year with no charges on most admin tasks.

    Generally, the lower the annual charge, the more likely there will be additional charges for admin tasks as these are not covered in the annual charge. It is a more explicit way of charging and has merits. If you are not heavy on admin tasks, that style of pricing can be attractive. However, if you are making regular admin tasks then a more inclusive pricing method may be more attractive.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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