SIPP tax relief

puk999

When I contribute to my SIPP, the tax relief shows in the SIPP cash account as uncleared. Many weeks (months?) later it will clear.

What takes it so long? Does this vary from provider to provider, or is this just an immutable HMRC delay? How long does your provider take?

Is it possible to transfer a SIPP to another provider while there is uncleared tax relief in the account?

I used to make additional contribututions to my employer's Group Personal Pension with Standard Life. SL reclaimed the tax relief and, as far as I was aware, the tax relief was immediately cleared. SL's website is very basic and doesn't show a separate cash account so perhaps the same thing happened there?

Your_Hero

Some providers give you instant tax-relief on SIPPs while others do not and it can take weeks for them to reclaim it.

I don't have an answer on why it takes so long. I can only imagine that there must be hundreds of thousands of requests each month so this must take time to verify.

dunstonh

What takes it so long?

As Your Hero says above. Most providers will prefund the tax relief. Those with tight cashflows or operating on a budget will make you wait until they get it from HMRC before adding it to your pension. 3 months is not uncommon for the time required.

bowlhead99

As an example from Sippdeal/Youinvest, customer services told me last year:

"Please note if you make a personal contribution into your SIPP between 1st – 5th of any month the 20% Tax Relief will be credited on or around the 25th of the following month. If you contribute after the 5th of any month it will take 2 months on or around the 25th of the month. "

The trustee/administrator of that one is AJ Bell who also provide services to a number of other providers' SIPPs, so even if you're doing your front end buy/sell transactions through someone like TD Direct it will be the same or similar engine in the background cranking through the reclaim process.

Although some providers might prefund tax relief it will not be the same for all schemes as it would effectively be their own money loaned to you, bankrolling you as you purchase funds or shares with their cash. They have some pretty decent certainty that it should come back in as a valid tax recovery - but it's up to them if they want to literally lend it to you for the intervening period and pay it over to the counterparty to acquire pension assets on your behalf.

That could be millions outstanding receivable from HMRC when scaled up across their investor base, which they have to finance with their own cash because the person they just bought shares or funds off on your behalf is unlikely to say 'sure, have these shares and start earning returns off them now, but just pay 80% now and you can send me the other fifth of the cash in a couple of months'.

With my employer scheme it just goes in gross so nothing to claim back anyway. With my SIPP scheme, if I subscribe £800 on 3 Sept I might not get the £200 back until 24 Oct. However if I'm contributing consistent amounts by direct debit the flow of £200pm at the end of each month will be a constant feature. So when I go to spend my money on 3 Nov, I'll have my £800 just paid in plus the £200 recovered from my Sept contributions, so I'll always have a full £1000 ready to deploy at the start of every month. I just have a timing difference those first couple of months which then stops being noticeable until I stop the cycle by going elsewhere or changing my contributions at some point.