Paying Vanguard fees

SlaveToMyCats

Sorry for a very basic question...

In a Vanguard SIPP, I have the choice between paying fees from my investment, vs via a bank transfer from outside the SIPP. Does one option leave me better off than the other?

Thanks!
Adrian

bowlhead99

A pound inside your SIPP account being spent on fees has cost you 80p of money from outside in the real world - or perhaps  only 60p if you got higher rate tax relief on your contributions.

A pound paid by bank transfer from your bank account without going into the SIPP first, costs you a pound.

So in most situations it is better to feed money into your SIPP and get the tax relief, and pay the bill from inside the SIPP with the tax-relieved money.

Tassie_Devil

I have a SIPP with another provider. I pay my quarterly fees via bank transfer, and get tax relief subsequently on the amount I pay in to pay the fees. So no difference either way.

bowlhead99

Tassie_Devil said:

I have a SIPP with another provider. I pay my quarterly fees via bank transfer, and get tax relief subsequently on the amount I pay in to pay the fees. So no difference either way.

I suppose the question is not how the other providers do it but whether Vanguard specifically, in collecting the charges by direct debit, treat that money as a contribution to the account (counting against your contribution limit for the year) or whether they are collecting it without treating it as a contribution to the account.  

A number of providers allowing charges to be collected and paid independently from the investment process by direct debiting it from outside the account will deliberately set it up as not counting as a contribution to the account - for example with ISAs where more people are able to max out their annual allowances for investment and don't want the charges to eat into their investment capacity.  

Albermarle

Tassie_Devil said:

I have a SIPP with another provider. I pay my quarterly fees via bank transfer, and get tax relief subsequently on the amount I pay in to pay the fees. So no difference either way.

I think most SIPP providers take their charges monthly and they can vary each month  especially for % based charging SIPPS .
I think for most people it is just simpler to pay the fees from within the SIPP. I keep a small cash balance permanently for this reason.

ffacoffipawb

Vanguards charges are capped. If you have a SIPP and ISA how do they deduct capped charges?

(1) ISA first then SIPP if required
(2) SIPP first then ISA if required
(3) Both, pro rata to fund value

Be interested to know.

Grogged

I'm under the cap, but mine are charged per account, so I'd assume they'll be pro rata at account level when I get there.
I'll let you know in 10 years!