SIPP fees - pay by card to avoid Annual Allowance?

Albermarle

Thanks for that Dunstonh. 
I only pay my Fidelity SIPP charges out of the cash management account because that is where they gave me the cashback for transferring. It will run out soon so will pay out of the SIPP after that ..

coyrls

From Interactive Investor SIPP charges FAQ:

How are SIPP charges paid?

The easiest way to pay is by monthly direct debit. You can set this up in your online account.

Alternatively the charges can be taken from any cash balance on your account.

There have been complaints in the past that it is very difficult to get II to take SIPP charges from a SIPP account.

Albermarle

If I recall correctly , if A J bell have to sell holdings to pay the fess they charge you £10 .

guli

dunstonh said:

I just spoke with another and they said it is a relatively recent change that allowed it they are thinking about bringing it in but are unsure of the benefit of it for the vast majority as its unclear as to whether it would actually be tax efficient to draw charges externally from the pension.  The ISA makes sense to do that but the pension is questionable.

Drawing the charges within the pension means you have got tax relief on the contributions going in but the charges take money out of the pension with no tax charge. So, you are effectively getting tax relief on your charges. Your pension would be lower (also helpful with LTA) but your external cash would be higher. 
Whereas paying the charge externally means your pension value will be higher but eventually subject to tax and your external non-taxable balance will be lower.

So, for the vast majority, it would not be tax efficient to draw the pension charges externally. If you are not hitting your annual maximum contributions every single year then you shouldn't pay the charges externally.

With a couple, you have both pension allowances, both ISA allowances and you can hold around £150k in a GIA each without tax (exc shareholding directors).  It would really only be someone in a niche scenario where it may make sense.  Those with money sufficient to use the annual pension and ISA allowances every year tend to be more concerned about the LTA.  So taking charges from the pension is more beneficial.

Thank you DoctorStrange for starting this thread.  Nice to have something different in respect of pensions.

Hi Dunsonh,

I can work out that is is £40k for pension annual allowance (if below thresholds), and £20k for ISA annual allowance. Where is the other £15k to shelter/defer tax from? 

Thanks!

dunstonh

guli said:

dunstonh said:

I just spoke with another and they said it is a relatively recent change that allowed it they are thinking about bringing it in but are unsure of the benefit of it for the vast majority as its unclear as to whether it would actually be tax efficient to draw charges externally from the pension.  The ISA makes sense to do that but the pension is questionable.

Drawing the charges within the pension means you have got tax relief on the contributions going in but the charges take money out of the pension with no tax charge. So, you are effectively getting tax relief on your charges. Your pension would be lower (also helpful with LTA) but your external cash would be higher. 
Whereas paying the charge externally means your pension value will be higher but eventually subject to tax and your external non-taxable balance will be lower.

So, for the vast majority, it would not be tax efficient to draw the pension charges externally. If you are not hitting your annual maximum contributions every single year then you shouldn't pay the charges externally.

With a couple, you have both pension allowances, both ISA allowances and you can hold around £150k in a GIA each without tax (exc shareholding directors).  It would really only be someone in a niche scenario where it may make sense.  Those with money sufficient to use the annual pension and ISA allowances every year tend to be more concerned about the LTA.  So taking charges from the pension is more beneficial.

Thank you DoctorStrange for starting this thread.  Nice to have something different in respect of pensions.

Hi Dunsonh,

I can work out that is is £40k for pension annual allowance (if below thresholds), and £20k for ISA annual allowance. Where is the other £15k to shelter/defer tax from? 

Thanks!

With the annual CGT allowance and £2000 dividend allowance, most people can hold around £100-150k unwrapped (in a general investment account) without being taxed.