Vanguard Sipp and Hmrc payment delay

plumb1_2

I opened a vanguard sipp last year and deposited £20k, within hrs I got 25% Hmrc payment £5k
Put another £5k in a the start of November, and the Hmrc payment is still pending after 7 weeks.
Put another £5k in this week, also pending.
I have read on Vanguard that it could take upto 8 weeks. Is the delay down to Hmrc or vanguard?

Can’t understand why my first payment took hours, and now it’s weeks.

MX5huggy

I think the latter (mine took 8 weeks last year) is the norm with VG. Not sure why it was near instant for you. There maybe a bit of a timing issue, maybe VG only apply once a month the HMRC only pay once a month. 

Kaizen917

I would presume its at least partially VG, reason being that my HMRC contributions for the LISA are about half that time (circa 4 weeks). I am not familiar with the process of claiming but I expect not to be simple one.

Nebulous2

I think some providers, possibly the more expensive ones, credit you with the tax refund immediately, allowing you to invest it before they receive it. 

Fidelity takes around 6-7 weeks for me before it is accessible. 

Albermarle

I opened a vanguard sipp last year and deposited £20k, within hrs I got 25% Hmrc payment £5k

This is the unusual part. Normally it takes a few weeks, with Vanguard and other SIPP providers. As mentioned the traditional insurers, like Standard Life, Aviva etc usually credit it straightaway.

dunstonh

I have read on Vanguard that it could take upto 8 weeks. Is the delay down to Hmrc or vanguard?

The big pension providers pre-fund tax relief. So, you get it instantly out of their money and they wait for HMRC to pay it to them.
Pre-funding comes at a cost to the provider as it could tie up hundreds of millions of pounds.   And whilst it is a benefit to the consumer, the smaller players cannot afford that sort of cost.    So, they do not pre-fund and you have to wait until HMRC pay them.

The providers that do not prefund will submit the return to HMRC once a month.   If you are close to that cut off, the time to wait will be shorter than if you did your transaction just after the cut off.

FNZ, the software supplier for Vanguard supports pre-funding (as there are other FNZ based platforms pre-funding).  Whilst globally, Vanguard is a big player and could afford to pre-fund, the UK arm is a small player and they have made a decision not to prefund.

Can’t understand why my first payment took hours, and now it’s weeks.

It should never have taken hours as Vanguard do not pre-fund.   You would need to wait until the return is submitted and HMRC pay Vanguard.  That is a process talking in weeks not hours.

I think some providers, possibly the more expensive ones, credit you with the tax refund immediately, allowing you to invest it before they receive it. 

Actually, its not down to cost as much as size and ability to swallow having hundreds of millions of pounds tied up in this.    Most DIY providers are relatively small.  Many (majority) are loss making.     They need their capital for other things.       It could be argued if those that prefunded stopped, they could lower their charges.  However, prefunding is beneficial to the consumer and can equate to a small reduction in the headline charge.   The Lang Cat did an article many many years ago on prefunding and put a figure on it using an example. The figure would vary depending on the level of prefunding (some prefund every transaction, some just tax relief) but from memory (and it was a long time ago) it was worth around 0.07% p.a.

And if they did stop it, a high proportion of the public would find that difficult to understand as they have had prefunded tax relief for generations. 

zagfles

plumb1_2 said:

I opened a vanguard sipp last year and deposited £20k, within hrs I got 25% Hmrc payment £5k
Put another £5k in a the start of November, and the Hmrc payment is still pending after 7 weeks.
Put another £5k in this week, also pending.
I have read on Vanguard that it could take upto 8 weeks. Is the delay down to Hmrc or vanguard?

Can’t understand why my first payment took hours, and now it’s weeks.

IIRC the way it shows on the website can be a bit misleading in the way it shows pending payments it can look like they're there already.

AIUI the way it works is providers claim the tax relief for contributions by tax months ie 6th to 5th of following month, and the tax relief is received from HMRC about the 21st of the month after. So for instance contributions made between 6th Dec and 5th Jan would get the tax relief on 21st Feb or shortly after. 

As mentioned above some providers give you effectively an "interest free loan" on the tax relief while waiting for it from HMRC, but as with all interest free loans, they just recoup the cost elsewhere, eg through higher platform charges. Vanguard at 0.15% platform charge is a lot lower than most of the big providers.

midlandsimon

That is the normal time for HMRC to make payment to a provider. Tax relief claims are made by a provider on the 5th of the month then received 21st of the next month. 

Insurance companies generally 'pre fund' the tax relief normally. But huge providers such as HL dont so all down to the provider. 

plumb1_2

Albermarle said:

I opened a vanguard sipp last year and deposited £20k, within hrs I got 25% Hmrc payment £5k

This is the unusual part. Normally it takes a few weeks, with Vanguard and other SIPP providers. As mentioned the traditional insurers, like Standard Life, Aviva etc usually credit it straightaway.

When I opened the sipp, it was my first adventure of going Diy. So I don’t really have a clue when the tax refund would be paid , but reading on mse informed me I would receive it..
It was virtually the next day I received the refund. So 10 months later I was expecting the same.
Maybe a cliché on vanguard?
A couple of things crossed my mind what could have delayed the 25%refund, 1- I’ve just received a large tax refund from over payment on my sole trader work,2- my sipp is all cash, as iam not intending investing it due to hopefully retirement this year.
But now I know better, thanks for the replies.

dunstonh

It was virtually the next day I received the refund. So 10 months later I was expecting the same.
Maybe a cliché on vanguard?

I haven't used Vanguard's software but sometimes platforms will show pending entries on the balance.   Maybe at that time they included it as pending cash because it would certainly not have arrived within hours.  Some platforms have multiple places you can view the balance.    One may show pending entries and the other doesn't.  

A couple of things crossed my mind what could have delayed the 25%refund

It is not a refund.  It is a relief.

1- I’ve just received a large tax refund from over payment on my sole trader work,2- my sipp is all cash, as iam not intending investing it due to hopefully retirement this year.

Neither of those things would impact on the receipt of tax relief.

plumb1_2

dunstonh said:

It is not a refund.  It is a relief.

1- I’ve just received a large tax refund from over payment on my sole trader work,2- my sipp is all cash, as iam not intending investing it due to hopefully retirement this year.

Neither of those things would impact on the receipt of tax relief.

Yes relief, my terminology incorrect. As I said iam new to this, so I forgive myself if others don’t?

Yes but for the uneducated , simple folk think of xyz, when the answer is abc
And I’ve been reading this mse forum for 12 mths now trying to gain knowledge, (old dog, new tricks). So thanks all for the enlightenment.