IFA Advice fees from pension pot

Pat38493

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?

lisyloo

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

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.

Pat38493

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

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.....

lisyloo

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.