Accrued pension tax relief

adamcartney

Has anyone been told that HMRC are being slow paying the pension tax relief? I made a contribution to my Fidelity SIPP in April and have still not received the tax relief on it. Fidelity keep telling me that there has been a "well-known" recent problem with HMRC being late in paying the relief. Would be interested to hear if anyone else has heard this.

Thanks

talexuser

Haven't heard that, but my tax relief for just before April has only just come through last week, and still waiting for the one from April 15th (I also secure mailed Fidelity couple of weeks ago to ask and they just said expecting it soon). So it looks like it will come eventually but taking f-a-r too long.

dunstonh

Has anyone been told that HMRC are being slow paying the pension tax relief?

Personally, I don't use providers/platforms that do not prefund. Research has shown that prefunding equates to around 0.1% a year benefit to the consumer. Not a life changing amount but in these days of 0.x% total charge per annum, it can make a difference.

There has been nothing stated in the financial press that I have seen about slow HMRC rebates.

xylophone

No problem with Hargreaves Lansdown.

Freecall

Some providers pre-fund and credit the relief on the day you make the contribution others credit when it is received from HMRC. I think that most platforms which do the latter publish their schedules such as here.

If you make regular monthly payments it can be worth seeking out pre-funders (even if they are more expensive) but for annual or less frequent payments you would have to do the arithmetic.

If it really was April - July then it sounds quite a long time to me.

JasonPr

Which providers pre-fund?

dunstonh

JasonPr wrote: »

Which providers pre-fund?

Virtually all personal pensions and stakeholder pensions and a number of platforms.

prefunding comes at a cost of the provider. So, you tend to find the cheaper providers are the ones that do no prefund. However, that is not always the case as some of the expensive ones do too.

Depending on the size of the provider, it can be very expensive running into millions of pounds. Not all providers/platforms have the financial ability to do it.

TheTracker

dunstonh wrote: »

Research has shown that prefunding equates to around 0.1% a year benefit to the consumer.

Research!? It's basic elementary maths!

The worth is TaxRelief * Return. eg 20% Relief x 6%pa return = 1.2%pa loss. So an average of a month without relief funding = 1.2% / 12 months = 0.1%.

Freecall

TheTracker wrote: »

Research!? It's basic elementary maths!

The worth is TaxRelief * Return. eg 20% Relief x 6%pa return = 1.2%pa loss. So an average of a month without relief funding = 1.2% / 12 months = 0.1%.

A bit hard just because the word ‘research’ was used.

I imagine that dunstonh is referring to the average overall effect on the pension pot rather than just the potential lost return on the tax relief.

Even if you only consider the effect as a proportion of the tax relief received, it is not as straightforward as you suggest however. Many people make regular monthly payments to their pensions which rather negates your division by 12.

TheTracker

Freecall wrote: »

A bit hard just because the word ‘research’ was used.

I imagine that dunstonh is referring to the average overall effect on the pension pot rather than just the potential lost return on the tax relief.

Even if you only consider the effect as a proportion of the tax relief received, it is not as straightforward as you suggest however. Many people make regular monthly payments to their pensions which rather negates your division by 12.

No, I meant the overall effect on the pension pot, not just the potential lost return on the tax relief. If I meant the tax relief only, then I would have said the loss is 6%/12 = 0.5% per month. It is as straightforward as my post showed, regardless of whether you make regular monthly payments or daily or annual. The division by 12 has nothing to do with how often you contribute, it is an assumption on the time taken for relief to be funded by HMRC/Platform being say 30 days.

So the loss is TaxBand% x Return% / 365 * DaysBeforeReliefFunding

eg 100 * 20% x 6% / 365 * 30 = 0.1% of the Gross Contribution

Happy to be corrected.