Tax relief & sipp

monaymadlol

Hi all

I recently transferred my actively managed SW personal pension to a SIPP, holding two multi asset index funds with ii. I chose ii due to the cashback offer for the transfer, fee free regular investing, and 6months free platform fee, plus lower costs Vs actively managed.

The tax relief to my surprise is paid up to 11 weeks or something.

My question is does this get paid into the investment account as cash, or paid into the funds as a reinvestment?

If the latter, I am then charged to reinvest as it's not a regular monthly investment? Is that correct? Seems to then become costly unless I let the tax relief mount up and reinvest back In lump sums a) transaction fee b) not immediately investing the tax relief straight away.

Am I missing something? Are all sipps/platforms this way?

dunstonh

he tax relief to my surprise is paid up to 11 weeks or something.

SW pre fund the tax relief.  So, it would have been instant.

My question is does this get paid into the investment account as cash, or paid into the funds as a reinvestment?

Depends on what options you have selected for it (assuming your platform gives a choice)

Seems to then become costly unless I let the tax relief mount up and reinvest back In lump sums a) transaction fee b) not immediately investing the tax relief straight away.

The loss of prefunding will cost around 0.07% p.a. in equivalent of charges.

Am I missing something? Are all sipps/platforms this way?

No.   Most intermediary platforms and providers pre-fund tax relief.  Most DIY platforms and providers do not.

monaymadlol

I don't think ii gave me a choice.

So it gets sent, in cash, many weeks down the line, and I have to pay a fee to feed into funds I already have? Wow!

dunstonh

monaymadlol said:

I don't think ii gave me a choice.

So it gets sent, in cash, many weeks down the line, and I have to pay a fee to feed into funds I already have? Wow!

This is the sort of thing you research when choosing your platform.  Perhaps you chose the wrong platform?

Most platforms don't charge for buying funds for example.   So, you have one that a) doesnt pre fund tax relief b) doesnt invest the tax relief but leaves it in case c) charges for investing into funds.   That is three areas that may not meet your requirements.

It could also be that your platform has a cheap headline rate and even if you add on the extra charges, it may still be a cheaper option.  However, it could be that the extra charges make it more expensive than a platform with a single charge that covers everything.

There is a lot of choice and variety out there. Each platform will have its pros and cons.   Software differences can also be significant with some platforms having many quirks or issues whilst others offer so much more.       Some of the biggest differences are how they handle drawdown.   The cheapest platform I have available to me is awful.     So, be wary of choosing a platform on cost alone (or headline cost if there are cost addons).     Functionality is also important.

artyboy

I've got an II SIPP and it gives me a monthly £5.99 trading credit - don't you get this as well?

Frankly though, this is "cake/eat it" territory. You've moved to what most would see as an ultra-low fee platform, especially for larger sums. You're getting a fee reduction and cashback on top, and you're seriously complaining about a potential small trading fee (if any) to occasionally invest received tax relief?

monaymadlol

dunstonh said:

monaymadlol said:

I don't think ii gave me a choice.

So it gets sent, in cash, many weeks down the line, and I have to pay a fee to feed into funds I already have? Wow!

This is the sort of thing you research when choosing your platform.  Perhaps you chose the wrong platform?

Most platforms don't charge for buying funds for example.   So, you have one that a) doesnt pre fund tax relief b) doesnt invest the tax relief but leaves it in case c) charges for investing into funds.   That is three areas that may not meet your requirements.

It could also be that your platform has a cheap headline rate and even if you add on the extra charges, it may still be a cheaper option.  However, it could be that the extra charges make it more expensive than a platform with a single charge that covers everything.

There is a lot of choice and variety out there. Each platform will have its pros and cons.   Software differences can also be significant with some platforms having many quirks or issues whilst others offer so much more.       Some of the biggest differences are how they handle drawdown.   The cheapest platform I have available to me is awful.     So, be wary of choosing a platform on cost alone (or headline cost if there are cost addons).     Functionality is also important.

I'm not sure I did, I researched, and a thread you also commented on here, confirmed that it was the best given my circumstances.

monaymadlol

artyboy said:

I've got an II SIPP and it gives me a monthly £5.99 trading credit - don't you get this as well?

Frankly though, this is "cake/eat it" territory. You've moved to what most would see as an ultra-low fee platform, especially for larger sums. You're getting a fee reduction and cashback on top, and you're seriously complaining about a potential small trading fee (if any) to occasionally invest received tax relief?

Not really cake and eat it. I'm still new to this (sipps, trading etc), so I incorrectly assumed, that the tax relief, whenever it was paid, would be paid directly back into the fund, free. 

So how long does your tax relief take to arrive, in cash, into your sipp account and do you periodically invest this back into the funds in chunks to save the fees?

artyboy

monaymadlol said:

artyboy said:

I've got an II SIPP and it gives me a monthly £5.99 trading credit - don't you get this as well?

Frankly though, this is "cake/eat it" territory. You've moved to what most would see as an ultra-low fee platform, especially for larger sums. You're getting a fee reduction and cashback on top, and you're seriously complaining about a potential small trading fee (if any) to occasionally invest received tax relief?

Not really cake and eat it. I'm still new to this (sipps, trading etc), so I incorrectly assumed, that the tax relief, whenever it was paid, would be paid directly back into the fund, free. 

So how long does your tax relief take to arrive, in cash, into your sipp account and do you periodically invest this back into the funds in chunks to save the fees?

I've only had it open a couple of months and I did it as a SIPP and ISA transfer in, partly to reduce fees and partly to get the cashback. So no experience with tax relief to date.

It's a fairly basic platform but as I'll only be transacting infrequently, the fees versus the monthly trading credit will save me a lot of money over time, especially as I'm just invested in vanilla funds that pretty much all SIPP platforms offer.

It's a nice bonus that I can also deposit to my II trading account via debit card and so get my Natwest 6% saver balance boosted via roundups...

daveharruk

With II, the money from the tax relief goes into your cash account (which you do get a nominal amount of interest on). Once the funds arrive in your account, as you've already bought the funds you should be able to add them as a regular investment which doesn't cost anything (but obviously you don't know the exact price you will pay).

BlobCore

The way I handle this with my ii SIPP is roughly…
contribute £400 per month (1st of month) via DD. A few days later the £100 tax relief is added albeit with 11 weeks lag. I’ve set my free regular investment of £500 to be made mid month. 

So once you’ve caught up on the 11 week lag there’s really no problem. I just set regular investment to £400 then increased to 500 after the tax relief started rolling in. 

Simple’s. 

monaymadlol

Thank you that makes sense.

I'm actually contributing that amount too 

My confusion was that the DD regular payments were to go directly from my bank to the allocated funds rather than that Holding cash account on the platform