The Pension Loophole article discussion

johnfthetraveller

Loophole article: "Wait until tax has been topped up, this usually takes four to six weeks."

Time taken for Bestinvest - 10 weeks. They also now quote "8-11 weeks" for the payment to be issued, once they have received completed documentation for the closure of the account".


Loophole article (Basic Rate Tax Payer for £8,000 put in): "Tax paid (on remaining sum) £1,500 (20% of £7,500)"

Bestinvest tax deducted: £2,014.91.

They tell me I have to claim the £514.91 over-deducted tax back from HMRC.


So from the £500 given out by the public purse:

- £400 charges lost to Bestinvest
- approximately £100 lost interest on £8,000 whilst in the SIPP,
- not to mention my time and effort, including now having to get money back from HMRC

Verdict ---- bad idea.

In the absence of any anyone who has successfully gone through the process, I suggest that the MSE loophole article be pulled until the whole issue is researched properly.

drphila

I contacted Fidelity (amongst others) through their web enquiry form to ask about charges but they didn't bother to reply so I won't be using them!

Medosh

Hi drphila
My suggestion is that if charges are important to you, then you should most definitely reconsider Fidelity. They appear to have NO charges. No for cash and no for funds no for SIPP admin and no for redemption. Intereest is added, so do not go close to the Max 10k!

drphila

Thanks Medosh, will chase them in view of your comments.

drphila

Had an email response from Fidelity in which they said:

"There would be no charge to a Fidelity SIPP in the case of a ‘triviality” payment or the subsequent closure of the pension."

("Triviality" is not strictly the same as a "small pot" payment but I guess the same applies)

archer123

Using this investment as a non-taxpayer, contributing £2880 and getting this made up to £3600 by HMRC, surely the lowest cost option would be a Stakeholder Pension, rather than a SIPP as the charges are capped. Or am I wrong, here?

jem16

archer123 wrote: »

Using this investment as a non-taxpayer, contributing £2880 and getting this made up to £3600 by HMRC, surely the lowest cost option would be a Stakeholder Pension, rather than a SIPP as the charges are capped. Or am I wrong, here?

Stakeholder in its time had good charges. However with today's charges of modern PPs and SIPPs they are often cheaper than a stakeholder.

jimjim46

Hi, I read the guide and decided to contribute two £8000 lumps. I have cashed in one, however I have a problem as the other has grown by £1.17 and now is too big to cash in. I have tried investing in funds with a buyers charge and so far I have made minimal impact on the value. I am currently buying £500 worth of a Ukraine specific fund in the hope that will fall enough. The company has now dealing charges and no selling cashing in charges. I note in the post below it is possible to transfer to make a pot smaller, can someone explain more please?


1. Small pot rule A: Take an unlimited number of occupational pension pots up to £10,000 each. Occupational pension pots are those you paid into via work.
2. Small pot rule B: Take up to three non-occupational pension pots up to £10,000 each.
3. Take up to £30,000 out of any number of pots if all of your remaining pots are worth less than £30,000.

In all cases you must be taking everything out of the pension pot, nothing must be left in it. In a few cases around the edge it can pay to work out how to waste money on fees or trading costs or deliberately bad investing just to get under the limit.

Someone could end up able to combine all of these to take out at least £60,000 plus an unlimited number of occupational pots worth up to £10,000 each.

It is permitted to transfer to make a pot smaller but if it is an occupational scheme you must not have transferred any money out within the previous three years.[/QUOTE]

dunstonh

Hi, I read the guide and decided to contribute two £8000 lumps.

Whilst you wrote the cheque for £8000, your contribution was actually £10,000. Pension contributions are treated as gross of tax relief.

I have tried investing in funds with a buyers charge and so far I have made minimal impact on the value. I am currently buying £500 worth of a Ukraine specific fund in the hope that will fall enough.

Why not just wait until April when the £10,000 rule no longer has any impact on what you can do.

berbatov10

Guys i have read this all with great interest as it links into a post I have asked about pensions. I meet the criteria to do it but one question about withdrawing 25% do you not have to be 55 or over??