We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

IFA Advice fees from pension pot

I might not be remembering this right, but I think I've seen a couple of comments recently that IFAs can take their fee directly from the pension pot?

This may be a silly question, but does this effectively mean that the IFA fees are discounted by my marginal tax rate or have I misunderstood that?

Or does it just mean that you give the IFA permission to make a withdrawal to pay their fees, but you pay tax on it as normal?

Can this also apply if it's a transaction for one off advice rather than an ongoing relationship?

Comments

  • lisyloo
    lisyloo Posts: 29,998 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Yes your fees are discounted as your money going in has saved income tax and possibly NI as well if you pay by salary sacrifice.
  • dunstonh
    dunstonh Posts: 118,551 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I might not be remembering this right, but I think I've seen a couple of comments recently that IFAs can take their fee directly from the pension pot?
    Where the provider supports it, yes they can.

    This may be a silly question, but does this effectively mean that the IFA fees are discounted by my marginal tax rate or have I misunderstood that?
    Effectively yes.  i.e. pay an adviser £1,000 out of your pocket and its cost you £1,000.       But pay £1,000 into the pension and get tax relief at basic rate meaning £1250 goes in.    The adviser then takes their £1,000 fee from the pension.  So, £750 is the difference.

    Or does it just mean that you give the IFA permission to make a withdrawal to pay their fees, but you pay tax on it as normal?
    Adviser fees are not classed as withdrawals and not taxed.
    Can this also apply if it's a transaction for one off advice rather than an ongoing relationship?
    Yes.




    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Pat38493
    Pat38493 Posts: 3,122 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper Combo Breaker
    dunstonh said:
    I might not be remembering this right, but I think I've seen a couple of comments recently that IFAs can take their fee directly from the pension pot?
    Where the provider supports it, yes they can.

    This may be a silly question, but does this effectively mean that the IFA fees are discounted by my marginal tax rate or have I misunderstood that?
    Effectively yes.  i.e. pay an adviser £1,000 out of your pocket and its cost you £1,000.       But pay £1,000 into the pension and get tax relief at basic rate meaning £1250 goes in.    The adviser then takes their £1,000 fee from the pension.  So, £750 is the difference.

    Or does it just mean that you give the IFA permission to make a withdrawal to pay their fees, but you pay tax on it as normal?
    Adviser fees are not classed as withdrawals and not taxed.
    Can this also apply if it's a transaction for one off advice rather than an ongoing relationship?
    Yes.




    This then also means that if the money in the pension got 40% tax relief and you are still working and paying HR tax, the savings are even bigger then?
  • dunstonh
    dunstonh Posts: 118,551 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Pat38493 said:
    dunstonh said:
    I might not be remembering this right, but I think I've seen a couple of comments recently that IFAs can take their fee directly from the pension pot?
    Where the provider supports it, yes they can.

    This may be a silly question, but does this effectively mean that the IFA fees are discounted by my marginal tax rate or have I misunderstood that?
    Effectively yes.  i.e. pay an adviser £1,000 out of your pocket and its cost you £1,000.       But pay £1,000 into the pension and get tax relief at basic rate meaning £1250 goes in.    The adviser then takes their £1,000 fee from the pension.  So, £750 is the difference.

    Or does it just mean that you give the IFA permission to make a withdrawal to pay their fees, but you pay tax on it as normal?
    Adviser fees are not classed as withdrawals and not taxed.
    Can this also apply if it's a transaction for one off advice rather than an ongoing relationship?
    Yes.




    This then also means that if the money in the pension got 40% tax relief and you are still working and paying HR tax, the savings are even bigger then?
    Correct.....
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • lisyloo
    lisyloo Posts: 29,998 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Pat38493 said:
    dunstonh said:
    I might not be remembering this right, but I think I've seen a couple of comments recently that IFAs can take their fee directly from the pension pot?
    Where the provider supports it, yes they can.

    This may be a silly question, but does this effectively mean that the IFA fees are discounted by my marginal tax rate or have I misunderstood that?
    Effectively yes.  i.e. pay an adviser £1,000 out of your pocket and its cost you £1,000.       But pay £1,000 into the pension and get tax relief at basic rate meaning £1250 goes in.    The adviser then takes their £1,000 fee from the pension.  So, £750 is the difference.

    Or does it just mean that you give the IFA permission to make a withdrawal to pay their fees, but you pay tax on it as normal?
    Adviser fees are not classed as withdrawals and not taxed.
    Can this also apply if it's a transaction for one off advice rather than an ongoing relationship?
    Yes.




    This then also means that if the money in the pension got 40% tax relief and you are still working and paying HR tax, the savings are even bigger then?
    Also some people (salary sacrifice) save employees NI and some people get employers NI passed on. Also employers contributions.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617.1K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.