What's your drawdown percentage and how much of that do you spend on financial fees?

pip895

Deleted_User said:

pip895 said:

If you stick to investing in etfs shares and ITs then for HL (ignoring trade costs) its £0 for GIA, £45 for an ISA and £200 for a SIPP.

Also, ETFs themselves may have costs/taxes which are not captured within TER. 

Yes but those will be the same for all accounts won't they..

JohnWinder

You'd imagine so. But trading costs within funds can differ. A cap weighted index fund will need to trade when stocks enter or leave the index - that's a handful each year, and other times such as new share issues. But equal weighted funds will be trading all the time as stock values change their weightings. And then there's active managers always looking for new opportunities.

You can get a sense of it part way through this podcast by the chaps who manage Vanguard's behemoth stock fund. Starting at 6:40 is enough: https://www.bogleheads.org/blog/2021/09/02/episode-037-gerry-oreilly-and-rich-powers-host-rick-ferri/

bostonerimus

Deleted_User said:

pip895 said:

If you stick to investing in etfs shares and ITs then for HL (ignoring trade costs) its £0 for GIA, £45 for an ISA and £200 for a SIPP.

Also, ETFs themselves may have costs/taxes which are not captured within TER. 

The UK investor has some fantastic tax shelters they can use in the ISA and the generous UK capital gains and dividend allowances. The US closest equivalent of the ISA is a ROTH account and that annual max contribution is about 1/6 of the ISA. So it should be easy for a UK investor with SIPP, ISA and general investment accounts to use their allowances and take out substantial income and pay no tax at all.  That's something to think about give the recent rise in NICs.

[Deleted User]

bostonerimus said:

Deleted_User said:

pip895 said:

If you stick to investing in etfs shares and ITs then for HL (ignoring trade costs) its £0 for GIA, £45 for an ISA and £200 for a SIPP.

Also, ETFs themselves may have costs/taxes which are not captured within TER. 

The UK investor has some fantastic tax shelters they can use in the ISA and the generous UK capital gains and dividend allowances. The US closest equivalent of the ISA is a ROTH account and that annual max contribution is about 1/6 of the ISA. So it should be easy for a UK investor with SIPP, ISA and general investment accounts to use their allowances and take out substantial income and pay no tax at all.  That's something to think about give the recent rise in NICs.

Will still pay withholding taxes on many foreign stocks, even within ISA/ROTH IRA/401K/TFSA/RRSP, etc.  And Stamp duty for UK in most cases.

pip895

Deleted_User said:
Will still pay withholding taxes on many foreign stocks, even within ISA/ROTH IRA/401K/TFSA/RRSP, etc.  And Stamp duty for UK in most cases.

I understand that these costs exist but I cant see that there would be any difference in them if held in a SIPP or ISA wrapper. 

I am also not convinced that they would be lower for passive investments.  Wouldn't a passive tracker need to trade far more frequently than for instance a buy and hold active fund with less than 30 holdings?

Notepad_Phil

JohnWinder said:

... But equal weighted funds will be trading all the time as stock values change their weightings...

I don't actually have any equal weighted funds myself, but my understanding is that most (/all?) normally only rebalance on a periodic basis. E.g. 3 months/6 months etc. So more than a purely passive fund, but not a major cost for the fund.

[Deleted User]

pip895 said:

Deleted_User said:
Will still pay withholding taxes on many foreign stocks, even within ISA/ROTH IRA/401K/TFSA/RRSP, etc.  And Stamp duty for UK in most cases.

I understand that these costs exist but I cant see that there would be any difference in them if held in a SIPP or ISA wrapper. 

I am also not convinced that they would be lower for passive investments.  Wouldn't a passive tracker need to trade far more frequently than for instance a buy and hold active fund with less than 30 holdings?

The SIPP vs ISA question isn’t something I know the answer to.  I know that depending on the fund, there is significant difference in withholding taxes between the Canadian versions of SIPP and ISA, so its possible/likely. For this reason I din’t hold US in the “ISA” wrapper and use funds traded on US exchanges for US investments .  This will be country specific. 

Passive funds trade a lot less than active but thats not the issue for withholding taxes. Anything that pays dividends could be impacted.

ETFs get around stamp duty for UK.

In summary there are lots of little details and its not simple to figure out. On the positive side, we are talking about costs which are significantly below 1%. 

Justso65

bostonerimus said:

pip895 said:

Age late 50s
Retired 10 years
Income rental & drawdown just commenced at 4.3% 
Financial fees - platform ~0.1% funds 50% active average ~0.3%

Current plan is that drawdown will reduce to ~3% on SP kicking in and stop from age 75 to be toped up and replaced by ISAs  all subject to change when the rules change..
 

Sounds like a tenable, well considered plan. Looks like about 10% of your drawdown is going to financial fees. It will be interesting to see the range of that percentage.

Excuse my ignorance but where does the 10% of drawdown on fees come from in the above figures?

SouthCoastBoy

bostonerimus said:

Deleted_User said:

pip895 said:

If you stick to investing in etfs shares and ITs then for HL (ignoring trade costs) its £0 for GIA, £45 for an ISA and £200 for a SIPP.

Also, ETFs themselves may have costs/taxes which are not captured within TER. 

The UK investor has some fantastic tax shelters they can use in the ISA and the generous UK capital gains and dividend allowances. The US closest equivalent of the ISA is a ROTH account and that annual max contribution is about 1/6 of the ISA. So it should be easy for a UK investor with SIPP, ISA and general investment accounts to use their allowances and take out substantial income and pay no tax at all.  That's something to think about give the recent rise in NICs.

Yes I have used them extensively, which means I have a 50:50 split between ISAs and Pensions so am hoping I pay very little in way of income tax. Not sure the recent rise in NICs is anything to be concerned about when drawing money from a pension as there is no NI to pay.

davethebb

I am 54 and will be due to draw down my SIPP in November. I also have a large ISA and GIA and all are through Interactive Investor which costs £20mth. My approximate withdrawal rate will be just under 4%. I moved away from my IFA mainly for the reason the OP highlighted e.g. the IFA cost can be a significant part of your income they also did not report the portfolio performance correctly and never included the platform costs etc. which I find very interesting.

One question I would like to raise is low cost funds vs funds that have perceived high management costs. My thoughts are that providing the funds are good quality with good history and fit the risk profile what are the issues in paying the fund manager a high fee as these are deducted BEFORE the performance is quoted - what you see in Trustnet etc. is what you get. Therefore if the fund outperforms a low cost fund of the same risk then this is what you are paying for in the management fees.