Best way to pay SIPP fees

where_are_we

I have transferred my SIPP to Vanguard. As a non - earner I will be contributing £2880 net per tax year. The SIPP will be fully funded - no cash. There is the option of paying the annual fee either by selling part of the largest holding or setting up a direct debit from the nominated account. What is the better option considering that the DD would not get any uplift from HMRC. 

Linton

Most financially efficient to take the cash from untaxed money in the SIPP.  This can easily be done. eg by keeping dividends as cash or by retaining a few £100 cash from fund purchases.

Costabit

Have thought about this myself.Agree that it is most financially efficient to pay from within SIPP I.e. from money that has had tax uplift but
Whether to keep cash on hand or fully invest and sell up when the fee is due is what I’m undecided on. 

Vanguard don’t charge to sell, so no problem there, but you could be selling at a price that hurts. I wonder how much difference it makes on a £50K holding for instance ?

AlanP_2

For a Vanguard style charging mechanism i.e. no buy / sell fee then I don't see that it is going to make a great deal of difference if they sell a small proportion of funds every month. The price will vary but that has to be offset against the "drag" that uninvested cash causes.

The bigger issue is that, if like at Fidelity, they will sell from the largest holding. That may not be be the one you would choose to sell from.

TBC15

Selling from part of the largest holding. HMRC are paying some of your costs.

where_are_we

Thanks everyone. It`s as I thought - pay from within the SIPP.  Holdings will be accumulation so no dividends. Because Vanguard don`t charge to sell I am happy with paying their fees by a sale of part of my largest holding.

NedS

AlanP_2 said:

For a Vanguard style charging mechanism i.e. no buy / sell fee then I don't see that it is going to make a great deal of difference if they sell a small proportion of funds every month. The price will vary but that has to be offset against the "drag" that uninvested cash causes.

The bigger issue is that, if like at Fidelity, they will sell from the largest holding. That may not be be the one you would choose to sell from.

I'm guessing it's going to be negligible to the point of not worth worrying about. Vanguard platform fees are 0.15%, so that's 0.0125% per month, or £12.50 on a £100k portfolio.

AlanP_2

NedS said:

AlanP_2 said:

For a Vanguard style charging mechanism i.e. no buy / sell fee then I don't see that it is going to make a great deal of difference if they sell a small proportion of funds every month. The price will vary but that has to be offset against the "drag" that uninvested cash causes.

The bigger issue is that, if like at Fidelity, they will sell from the largest holding. That may not be be the one you would choose to sell from.

I'm guessing it's going to be negligible to the point of not worth worrying about. Vanguard platform fees are 0.15%, so that's 0.0125% per month, or £12.50 on a £100k portfolio.

True for Vanguard as you say, and I had forgotten that was the platform, but not so good on other platforms necessarily. If ETFs and / or ITs and /or shares are held the £12.50 pm platform fee might incur a £10 dealing fee.

In an ISA we have with Fidelity the only holiding is a single company shares. I wouldn't want them to sell those each month to cover the very low platform fee.