Paying into addtional SIPP via net pay arrangement from NHS employer

mrkds

Hi all

I am currently an NHS employee in the higher tax bracket. To supplement my existing NHS pension, I am considering setting up  a roboinvesting SIPP with Nutmeg (I don't haver the time or inclination to delve into the rabbit warren of trading and enivestments so I'd  rather pay a little extra to have it done for me!)  

I understand that I automatically get the lower 25% tax relief from HMRC but to get the additional higher rate tax relief in need to contact HMRC myself.

My question is, is it possible to set up a 'net pay arrangement' with my NHS employer to deduct my SIPP contributions directly from my pay? Thereby I get all the tax relief automatically. If so, how do I arrange this? 

If this is not possible, is there quick and easy way to get the higher tax relief from HMRC? 

Any advice greatly appreciated! 

r6mile

Why don't you just join the NHS Additional Voluntary Scheme? It will be deducted from net pay so you won't have to chase HMRC for tax refunds. If you are not looking to get the flexibility of a full SIPP, then you may find the investment options in the AVC scheme more than sufficient. This is what I've done and joined the Civil Service AVC scheme (having switched from Nutmeg), which I imagine is similar to the NHS one. The fees may also be cheaper than Nutmeg.

EDIT: I realise my answer is a duplicate to an earlier question you asked in another thread.
You will not get the NHS to pay directly into a SIPP or personal pension. If you decide to go down that route, you will have to get HMRC to pay you back the tax: you can let them know via a phone call or a letter but may take you some time to get the money back, as I have found myself.

Pat38493

^^  What r6mile said.

Also - from what I have seen on Nutmeg's web site, you should be aware that they seem to have exit charges if you want to transfer back out again.  Most modern pension providers these days don't have exit charges.  There was also a recent thread stating that Nutmeg insists on transacting via phone calls for transactions that many other providers will do completely online these days.

dunstonh

 I am considering setting up  a roboinvesting SIPP with Nutmeg 

Nutmeg do not offer a SIPP.

(I don't haver the time or inclination to delve into the rabbit warren of trading and enivestments so I'd  rather pay a little extra to have it done for me!)  

Its not actually a llitle extra compared to other low cost simple options.  Even IFAs under full advice can beat their charges.

My question is, is it possible to set up a 'net pay arrangement' with my NHS employer to deduct my SIPP contributions directly from my pay? 

Not a chance in hell.

mrkds

r6mile said:

Why don't you just join the NHS Additional Voluntary Scheme? It will be deducted from net pay so you won't have to chase HMRC for tax refunds. If you are not looking to get the flexibility of a full SIPP, then you may find the investment options in the AVC scheme more than sufficient. This is what I've done and joined the Civil Service AVC scheme, which I imagine is similar to the NHS one.

Thanks. These AVC schemes were recommended in another question I asked on this forum. But reading  a bit more about them I got the impression they were not good value for money compared to SIPPs. Tbh I don't fully understand all the differences. The fee structure for the AVC schemes were a bit impenetrable to understand! In contrast Nutmegs fee structure is pretty straightforward. Also I like that investment allocations change with changing market conditions, which doesn't seem to be the case with AVCs.

mrkds

Pat38493 said:

^^  What r6mile said.

Also - from what I have seen on Nutmeg's web site, you should be aware that they seem to have exit charges if you want to transfer back out again.  Most modern pension providers these days don't have exit charges.  There was also a recent thread stating that Nutmeg insists on transacting via phone calls for transactions that many other providers will do completely online these days.

I see! Thanks for the warning! 

dunstonh

The fee structure for the AVC schemes were a bit impenetrable to understand! In contrast Nutmegs fee structure is pretty straightforward. 

Nutmeg is multi-charged (i.e. has more than one charge).   The AVCs are mono charged (a single charge).  So, the AVCs should be easier.

Also I like that investment allocations change with changing market conditions, which doesn't seem to be the case with AVCs.

It depends on what investment funds you use on the AVC.   A multi-asset fund on the AVC does adjust.

mrkds

dunstonh said:

Nutmeg is multi-charged (i.e. has more than one charge).   The AVCs are mono charged (a single charge).  So, the AVCs should be easier.

It looks like AVCs are multi-charge as well. E.g the Pru scheme has a 'annual management charge' and a ‘further costs’ charge.  And these are the charges for funds, so you need to work out yourself what the charges are for whatever lifestyle withi its unique combination of funds (of which there are many). I have found it a little overwhelming trying to understand it all.

It depends on what investment funds you use on the AVC.   A multi-asset fund on the AVC does adjust.

There seem to be lots of ‘multi-asset’ funds available on the AVC, but I’m not sure how ‘dynamic’ these are. i.e. how much they change with changing market conditions. For me this is the 'USP' of a roboinvesting option like Nutmeg. Am I being blind-sighted by this feature?

mrkds

r6mile said:

Why don't you just join the NHS Additional Voluntary Scheme? It will be deducted from net pay so you won't have to chase HMRC for tax refunds. If you are not looking to get the flexibility of a full SIPP, then you may find the investment options in the AVC scheme more than sufficient. This is what I've done and joined the Civil Service AVC scheme (having switched from Nutmeg), which I imagine is similar to the NHS one. The fees may also be cheaper than Nutmeg.

EDIT: I realise my answer is a duplicate to an earlier question you asked in another thread.
You will not get the NHS to pay directly into a SIPP or personal pension. If you decide to go down that route, you will have to get HMRC to pay you back the tax: you can let them know via a phone call or a letter but may take you some time to get the money back, as I have found myself.

Thanks for the update (and for helping me with my previous question I'm curious what made you switch from Nutmeg to the AVC? Have you noticed any difference in growth since switching?

r6mile

mrkds said:

r6mile said:

Why don't you just join the NHS Additional Voluntary Scheme? It will be deducted from net pay so you won't have to chase HMRC for tax refunds. If you are not looking to get the flexibility of a full SIPP, then you may find the investment options in the AVC scheme more than sufficient. This is what I've done and joined the Civil Service AVC scheme (having switched from Nutmeg), which I imagine is similar to the NHS one. The fees may also be cheaper than Nutmeg.

EDIT: I realise my answer is a duplicate to an earlier question you asked in another thread.
You will not get the NHS to pay directly into a SIPP or personal pension. If you decide to go down that route, you will have to get HMRC to pay you back the tax: you can let them know via a phone call or a letter but may take you some time to get the money back, as I have found myself.

Thanks for the update (and for helping me with my previous question I'm curious what made you switch from Nutmeg to the AVC? Have you noticed any difference in growth since switching?

1. Main reason to switch is how difficult I’ve found getting HMRC to issue me the tax relief due to the contribution to my Nutmeg pension I made in 22/23. I submitted the return in April but am still waiting as I’ve been caught in some sort of security checks. So a net pay AVC scheme would avoid that in the future.

2. But I also feel like I am more knowledgeable about investments (partly through browsing this forum), so feel more confident about making my own decisions. I don’t need the investment range offered by a “full SIPP”, and the fund options in the CS AVC scheme (Legal and General) are pretty decent,

3. It is also cheaper. For a sub-100k pension, Nutmeg charges 0.75% plus fund fees, which in my case (Socially Responsible portfolio 8/10 risk) is an extra 0.31% = so 1.06% total. In the L&G AVC scheme their fees are 0.12% plus fund charges - I am thinking of putting most of my contributions in the Future World Fund which charges 0.24% - so 0.36% total - around a third of the cost for a similar type of portfolio. There’s lots of other options that are cheaper, including their Multi-Asset Fund (though this is too low in equities for me). The charges in the NHS scheme may be more expensive though.

I haven’t yet been able to measure performance as I’ve only just joined the AVC scheme this month.

mrkds

@r6mile thanks those are really helpful insights. 

The HMRC delays would be a big turn off for me as well. 

Re the fees, for you this seemed to be a no-brainer. 0.12% seems insanely cheap.  In my case the 'standing' charges so to speak, are 1% or 0.75% for the two NHS AVC schemes, which aren't that competitive compared to Nutmegs 0.75%, although fund fees are a bit lower (around 0.01-0.1% and 0.2-0.35%).  So, still not 100% convinced by the AVC options.