Holding Income AND Accumulation units of the same Fund?

[Deleted User]

Ok, don't call me crazy. I have a smallish SIPP and currently not paying anything into it as off work.

I have around 10 funds. But thinking of buying the income and accumulation unit of each.

90% as accumulation, 10% as income. The dividends from the income units will pay the SIPP platform fees.

Any opinions on my plan?

MaxiRobriguez

Two things:

1) If you think accumulation method is better (given you're allocating 90% to it) then why not 95%? Or 100%? And then sell a bit each month to pay for platform fees? Are you sure that costs of trading in such manner outweight 10% income route?

2) If your accumulation outstrips income (which it will, at this rate), there will be a point whereby your % costs aren't met by income received.

I'd be less concerned about this split and more inquisitive as to why you have 10 funds in what you call a "smallish" SIPP.

bowlhead99

I wouldn't turn it into 20 funds by having an Inc and Acc version of everything.
If you want to ensure you always have some money to pay fees on the platform, just have one or two of your holdings be Inc and the rest Acc.

From time to time you will presumably rebalance the holdings anyway. At that time you can do a bit of buying and selling and make sure you have the amount that you want, invested into the funds that you want. You will not necessarily be materially closer to that 'ideal' allocation if you have 10% of the dividends of each and every fund being allocated to 'pay out rather than internally reinvest' platform fees - because each fund will have a different level of natural dividends and natural growth.

[Deleted User]

MaxiRobriguez wrote: »

Two things:

1) If you think accumulation method is better (given you're allocating 90% to it) then why not 95%? Or 100%? And then sell a bit each month to pay for platform fees? Are you sure that costs of trading in such manner outweight 10% income route?

2) If your accumulation outstrips income (which it will, at this rate), there will be a point whereby your % costs aren't met by income received.

I'd be less concerned about this split and more inquisitive as to why you have 10 funds in what you call a "smallish" SIPP.

1. It is also for convenience. I'm still quite young so this is a long term investment, I'd rather just put it away and not look at it for 25 years. With all accumulation, I'll have to log in quarterly, sell part of a fund, and also pay a dealing charge. I know it'll take seconds but still annoying.

2. Good point, I never thought about that, I think I might for 100% all accumulation and just sell quarterly.

george4064

To drill down a bit further, what is the value of your SIPP and which platform is it held with?


With that info, we can help you analyse the costs/benefits of the platform specifically for your SIPP.

Tom99

Sounds quite a messy solution. Would it not be possible to put a small amount of cash into the SIPP account just to tide you over until you are working again, then split every payment in to 99% invested 1% cash or whatever.

Alexland

I dont see the harm in having a small income generating holding to pay platform fees.

SeniorSam

YOU should not need to do anything quarterly. The Sipp platform usually do this all for you if needed, so you would be able to just leave it and let the platform sell a few units as needed to meet costs. Speak with them to check that this is correct as not all may work that way. Once set up, make a point of looking at progress at least every six months. See what the investments are doing and consider if you need to make any changes. Above all, try and find time to look at investments and build your knowledge, as the more you know, the better chance you will have to build a bigger pension.

Alexland

SeniorSam wrote: »

YOU should not need to do anything quarterly. The Sipp platform usually do this all for you if needed, so you would be able to just leave it and let the platform sell a few units as needed to meet costs.

It really depends on the platform for example AJ Bell YouInvest expect you to be in better control of your account cash balance so charge a £29.95 fee for performing a disinvestment to pay platform fees.

I pay a small amount into a SIPP each month to cover the platform fee but it annoys me as I can get salary sacrifice via my workplace pension so I am not getting the NI saving on this small amount.

Alex

Albermarle

It really depends on the platform for example AJ Bell YouInvest expect you to be in better control of your account cash balance so charge a £29.95 fee for performing a disinvestment to pay platform fees.

That is quite harsh, I do not think most of the other well known SIPP providers charge at all ( maybe a small trading charge in some cases) Could be a reason for a less experienced/ hands off SIPP investor ( the type who probably should not have a SIPP anyway but a PP/stakeholder) to avoid AJ Bell , as it would need more monitoring .

Alexland

Albermarle wrote: »

That is quite harsh, I do not think most of the other well known SIPP providers charge at all ( maybe a small trading charge in some cases) Could be a reason for a less experienced/ hands off SIPP investor ( the type who probably should not have a SIPP anyway but a PP/stakeholder) to avoid AJ Bell , as it would need more monitoring .

I seem to remember another forum member noticed they do allow the cash balance to go a bit negative before taking action but they don't seem to publish any detail on this aspect.

Alex