Pay pension fees from the pot or from my bank account?

gelato_cat

I opened a new pension last year and realised that they were taking the fees out of my pot.  I assume the money would be better off staying in the pot, so I changed this to direct debit from my current account instead.

What do others do?

I have another, tiny, old, pension with a different provider where they take the fees out of the pot and I am wondering if it's worth switching that one to DD as well.  (I'm holding off transferring that one into my new pension because I opted out of some NI contributions etc, so I need to research that a bit more first.)

theblueflash

Paying from the pot means you are effectively paying with tax free cash. Paying from outside pension wrapper is, I am presuming, from taxed income? So arithmetically at least, fees would be better coming from the pot ? Just an opinion though and sure others will offer their view . 

bjorn_toby_wilde

My company pension scheme always takes fees from the pot by selling a small proportion of the equities every month.

I hold a small amount of cash in my AJ Bell SIPP, enough to cover the fees. It’s earning interest there (although not much).

To be honest I’ve not really thought much about which is best though. Perhaps I should!

Scrudgy

I have a SIPP, ISA and GIA with Interactive Investor.

The method of paying fees are:-
Direct Debit
Funds from GIA
Funds from ISA
Debit card

Funds from SIPP is not an option at all and it is not possible to pay this way. I assumed its because it would mess up the values for monitoring FAD/UFPLS/PCLS  etc.

Sarahspangles

I have set up a trading account alongside my SIPP, it simply holds cash to pay the trading fees and custody charges for my SIPP (AJ Bell). As per @theblueflash it means I’m not losing the benefit of tax free cash.

I like not having to check I am holding enough cash to cover the monthly custody charge. I just maintain a balance of about 3 months charges in the trading account so if I get busy and take my eye off the ball I’m still covered. A small amount of cash does still build up in the SIPP from odd bits of interest and other adjustments.

I prefer that if I contribute a round figure to the SIPP I can invest all of it in specific fund. That way I can quickly see that what cost me £10,000 has made £xxxx.

dunstonh

I opened a new pension last year and realised that they were taking the fees out of my pot.  I assume the money would be better off staying in the pot, so I changed this to direct debit from my current account instead.

What do others do?

You are financially better off by paying fees from within the pension due to tax relief.

Say your fee was £1000 over the year.      £1000 in the pension has had tax relief.  So, it cost £800 (assuming basic rate).   Whereas if you pay the fee outside of the pension, it will cost you £1000.

Qyburn

Unless you're already paying the absolute maximum into the pension.

cloud_dog

Scrudgy said:

I have a SIPP, ISA and GIA with Interactive Investor.

The method of paying fees are:-
Direct Debit
Funds from GIA
Funds from ISA
Debit card

Funds from SIPP is not an option at all and it is not possible to pay this way. I assumed its because it would mess up the values for monitoring FAD/UFPLS/PCLS  etc.

We hold SIPPs only with both II and AJB and the platform charge comes out of the cash held in the SIPP account.  I assume it is allowed as we have no other accounts with them.

Albermarle

cloud_dog said:

Scrudgy said:

I have a SIPP, ISA and GIA with Interactive Investor.

The method of paying fees are:-
Direct Debit
Funds from GIA
Funds from ISA
Debit card

Funds from SIPP is not an option at all and it is not possible to pay this way. I assumed its because it would mess up the values for monitoring FAD/UFPLS/PCLS  etc.

We hold SIPPs only with both II and AJB and the platform charge comes out of the cash held in the SIPP account.  I assume it is allowed as we have no other accounts with them.

Fidelity will also take money from my SIPP, if there is no money in the separate cash management account.
If there is no cash in the SIPP they will sell something with no charge. I believe some platforms ( AJ Bell ?) will charge a fee,  if they have to sell investments to cash to pay charges.

Gary1984

Scrudgy said:

I have a SIPP, ISA and GIA with Interactive Investor.

The method of paying fees are:-
Direct Debit
Funds from GIA
Funds from ISA
Debit card

Funds from SIPP is not an option at all and it is not possible to pay this way. I assumed its because it would mess up the values for monitoring FAD/UFPLS/PCLS  etc.

I have a SIPP and only a SIPP with II. As a result my fees come from cash in the SIPP and I keep my ISA with another provider so I don't need to pay SIPP fees out of taxed income.

granta

Just to check...if you use all your pension allowance one year, then presumably it is better to pay the fee from outside the pension to maximise your allowance. Or does it make no difference in the end? I hoping to maximise out my allowance in the next tax year so wondering if I should ensure all fees are paid from my bank account.