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SIPPs
Theo Shackleton
Posted: 04 April 2018 09:08:39(UTC)
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I'm going to start paying into one of these through my employer. Could anybody recommend a platform where the fees are reasonable and there is decent access to funds?

I have an ISA with Cavendish (it is fidelity, but cheaper than going directly to fidelity). Total platform charge is 0.25% per annum. Then whatever funds charge. Does anybody know of a cheaper / better option?

Also, do Sipps involve any other fees, like when the time comes to draw on the pension? Or is it always just that the platform fee is paid? I read some things about 'draw down' and annuities but didn't understand what they meant or if they were relevant.

Finally, am I right in thinking that when drawing on the pension in future, I will just pay income tax on whatever the amounts are that I withdraw each year (minus 25% lump which would be tax free)?

Thanks in advance!
Tim D
Posted: 04 April 2018 09:24:30(UTC)
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You should find this a useful list: http://monevator.com/com...heapest-online-brokers/

Some would advocate avoiding % of assets fees on funds on the platforms which charge for them by just holding ITs/ETFs/direct shareholdings there.
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Theo Shackleton on 04/04/2018(UTC)
Theo Shackleton
Posted: 04 April 2018 09:57:44(UTC)
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Tim D;60096 wrote:
You should find this a useful list: http://monevator.com/com...heapest-online-brokers/

Some would advocate avoiding % of assets fees on funds on the platforms which charge for them by just holding ITs/ETFs/direct shareholdings there.


Thanks Tim.

I wonder if the a low fee from a passive fund, even if it is extracted from the assets, ends up being more than the dealing fees involved in buying and selling those other types of holding?
markus
Posted: 04 April 2018 10:21:51(UTC)
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Theo Shackleton;60100 wrote:
Tim D;60096 wrote:
You should find this a useful list: http://monevator.com/com...heapest-online-brokers/

Some would advocate avoiding % of assets fees on funds on the platforms which charge for them by just holding ITs/ETFs/direct shareholdings there.


Thanks Tim.

I wonder if the a low fee from a passive fund, even if it is extracted from the assets, ends up being more than the dealing fees involved in buying and selling those other types of holding?



you need to do the maths & stop wondering.

at a certain portfolio size the funds vs ETF/IT/Share will result in greater platform costs.

AJ Bell max is £25 a quarter for ETF/IT/Share @ 0.25% so once portfolio is beyond £40k you are better off with ETF/IT/Share holdings.
Tim D
Posted: 04 April 2018 10:23:22(UTC)
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Theo Shackleton;60100 wrote:
I wonder if the a low fee from a passive fund, even if it is extracted from the assets, ends up being more than the dealing fees involved in buying and selling those other types of holding?


Do the math (or let Vanguard do it for you)... over multiple-decade lifetime-saving timescales, even quite small annual percentage fees on all your assets are an insidious cumulative drag on your wealth. Paying £10 to put £10000 into a 0.1% OCF index tracking ETF and sitting on it for a decade or two makes a lot more sense than investing in an index tracker fund where you're charged 0.1%OCF+0.45% platform fee per year, even if it saved you a £10 dealing charge.
Theo Shackleton
Posted: 04 April 2018 10:55:06(UTC)
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But if I have an isa or a sipp then the platform fee has to be paid regardless. So isn't it platform fee, plus dealing costs, plus ongoing management fee of fund or etf? I don't see what the difference is, unless an etf ongoing fee is much much lower than a fund (I mainly want to use passive ones).
markus
Posted: 04 April 2018 11:37:28(UTC)
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Theo Shackleton;60103 wrote:
But if I have an isa or a sipp then the platform fee has to be paid regardless. So isn't it platform fee, plus dealing costs, plus ongoing management fee of fund or etf? I don't see what the difference is, unless an etf ongoing fee is much much lower than a fund (I mainly want to use passive ones).


If an ISA/SIPP has a percentage platform fee....some will limit the charges if holding shares/IT/ETF's.

AJ Bell SIPP is 0.25% with a max £25 a qtr for shares/IT/ETF but no max for funds.


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Theo Shackleton on 04/04/2018(UTC)
Keith Hilton
Posted: 04 April 2018 11:40:30(UTC)
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Theo, take a look at the AJ Bell SIPP charges as an example ...

https://www.youinvest.co.../sipp/charges-and-rates

The custody charge is what you'll pay the platform, on top of the funds OCF. Note that whilst the % for funds and individual shares/ETFs/IT's is the same, the funds custody charge is not capped, whilst the other investment types are capped at £25 per quarter.

Compare this to other platforms, as some will have higher % custody charges, whilst some may just have a flat fee.

See the other charges as an example of the fees that you may pay in future, on whatever platform you choose. Although be aware that they could be totally different by the time it comes to applying them to your SIPP.
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Tim D on 04/04/2018(UTC), Theo Shackleton on 04/04/2018(UTC)
Tim D
Posted: 04 April 2018 11:44:20(UTC)
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Theo Shackleton;60103 wrote:
But if I have an isa or a sipp then the platform fee has to be paid regardless. So isn't it platform fee, plus dealing costs, plus ongoing management fee of fund or etf? I don't see what the difference is, unless an etf ongoing fee is much much lower than a fund (I mainly want to use passive ones).


Yes but the point is, some platforms charge a higher platform fee for fund holdings than they do for other types of investment. e.g Hargreaves Lansdown will let you hold ITs/ETFs/shares for free, but want 0.45% of your funds (unit trusts, OEICs) every year. Others simply charge a flat-fee (or will cap their percentage take, which amounts to the same thing once you've saved enough). So which is the cheapest platform is quite dependent on what you're going to invest in (as well as how much you're going to have invested and how often you're going to trade... but over the long run for most long-term buy-and-hold investors it's percentage-of-assets fees nibbling away at your pot every year which is more of a killer than whether you save a few tenners from cheaper trades).
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Theo Shackleton on 04/04/2018(UTC)
Theo Shackleton
Posted: 04 April 2018 11:58:28(UTC)
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I see. This all makes sense now. So maybe I ought to be going down the ETF route rather than funds. Suppose the other advantage is more real-time trading, without delays. Hmm.

I'll make some enquiries. Thanks for these responses. I'm learning new things every day!

Incidentally, I've settled on the likes of fundsmith, LS100, and vanguard FTSE global all cap funds as part of a long term strategy, where the intention is to leave them alone and be as diverse as possible across the market. Are there etf equivalents to these that amount to a similar thing? I've been completely focused on funds so far.

Speaking of which, why do people bother with funds at all, if etfs prove better value for money?
Theo Shackleton
Posted: 04 April 2018 12:11:21(UTC)
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I see... So based on that AJ Bell link...

If I have £100,000 invested.

In funds, I will be paying £250 a year for the platform fee alone (0.25%).

In ETFs, capped at £25 per quarter, I only pay £100 year.

Then, when fund/ETF management fees are added, and taking account of compounding over time, then the difference will add up.
Tim D
Posted: 04 April 2018 12:13:39(UTC)
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Theo Shackleton;60109 wrote:
Speaking of which, why do people bother with funds at all, if etfs prove better value for money?


All depends on the details of platforms' charges. I primarily use a flat-fee platform (Alliance Trust Savings) and pay no more to hold funds there than I do to hold anything else. Last time I crunched the numbers I was 2/3 in funds, 1/6 trusts and 1/6 ETFs. But ATS fees would be expensive (compared with other percentage-charging platforms) for smaller pots.

There must be other platforms out there good for funds.. not looked into what they are myself. If you're just starting out, initially a percentage-of-assets charging model will surely be cheaper than flat fee. The important thing is to move to somewhere cheaper once you've amassed enough that percentage-of-assets charges really start to bite.... investor inertia must be a huge contributor to wealth management industry profits.

Update: .. just noticed your post re AJBell above... yes you've got the right idea... (and 0.25% for funds seems not bad compared with HL's 0.45%!)
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Theo Shackleton on 04/04/2018(UTC)
Aminatidi
Posted: 04 April 2018 12:25:45(UTC)
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Theo Shackleton;60109 wrote:

Speaking of which, why do people bother with funds at all, if etfs prove better value for money?



Fundsmith
Lindsell Train Global Equity
Buffettology

If you want those (and doubtless many others) you've no choice as they only offer a fund.
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Theo Shackleton on 04/04/2018(UTC)
Theo Shackleton
Posted: 05 April 2018 17:21:03(UTC)
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So what do you guys think, is the sipp worth it in my case?

I have some catching up to do with pension contributions (over a decade's worth!) so am planning to pay around £6k a month of wages into one. And continue whilst I am able to. So I'll get the tax relief. No employer contributions though.

Am I right in thinking the limit is £40k per annum to pay in?
Is it possible to pay in chunks from savings and claim back the tax retrospectively?

Is there is any logic to paying into an isa, other than the flexibility?

Thanks
Jim S
Posted: 05 April 2018 17:51:40(UTC)
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I believe the annual limit is £40k per annum or 100% of your salary, whichever is lower. I think its much less if you are lucky enough to have a salary over £100k-ish, if thats relevant for you, best to check the rules carefully.

The main benefit comes from putting in up to your employers matching contribution, or whatever it takes you get you just below the higher rate tax threshold.

When I started my pension catchup, I just asked my HR to increase my contribution to 30%, then later I increased it to 40% then 50%. Also I notified HMRC in case it was relevant for the next financial year's tax code. If you have an HR department at work, I guess you could just ask them to adjust your pension contribution to whatever you want?
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Theo Shackleton on 05/04/2018(UTC)
Theo Shackleton
Posted: 05 April 2018 18:08:23(UTC)
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So if I put 40k into the sipp this year, everything else I earn above that, this year, will starting from zero in terms of tax and NI?

Basically, my options are to:

- just save income. So low rates of interest, inflation, and tax all downsides.

- put the 20k into an isa. No tax relief main downside.

- put it all in a sipp and save tax/NI contributions. Downside is lack of flexibility but I expect that with a pension.

Am I missing any options? Isn't the sipp the no brainer here as I'm saving for the future?

markus
Posted: 05 April 2018 22:15:35(UTC)
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remember if you are a youngster you can't get your SIPP until your 57 from 2028. That might require a balance between SIPP/ISA/Other if you want 55 or earlier.

remember your contribution allowance £40k starts to taper down if you earn over £150k a yr.

the £40k is a gross contribution so if I was paying direct into my SIPP I would pay in £32k & provider would claim the tax back to make £40k. As I've paid 40% tax on that I would claim the remainder of tax back from HMRC directly.

You could catch up contributions through carry forward of past 3 tax yrs £40k allowance. Requires you to contribute your full £40k & have sufficient income and a bit of paper work to make it happen.

In terms of NI etc - would have thought the pension comes off the top (rather than at the start as you see it) making NI savings for high earners just 2%...suspect playing around with some online PAYE calculators will confirm that.

pension regulation could well change as you approach the goal posts...reneging on today's no-brainer decision....so maybe not all your eggs in one basket time.
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Theo Shackleton on 05/04/2018(UTC)
Aminatidi
Posted: 06 April 2018 12:58:52(UTC)
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Rather than start a new thread with the exact same name could someone help me get something clear in my head.

My employer has a Royal London pension scheme which I'm in with a 9+9 contribution - it's a good scheme.

I'm in the process of finding out if I can make additional one-off contributions, but if I do it's still in the Royal London scheme with the fairly limited range of things they offer.

If I wanted to open a SIPP and pay into it separately is there anything at all stopping me from doing so?

I'm cautious of the restrictions around not being able to access the money, but other than that is it literally that simple?
Tom Mozy
Posted: 06 April 2018 13:52:31(UTC)
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Aminatidi - you can have as many Sipp's as you want but must adhere to the rules for contribution and size limits etc

From experience its alot easier dealing with a company online such as HL or AJ Bell than trying to top up a company scheme.

I often move my company SIPP (when it gets to a certain level) into my HL SIPP (takes a week with HL) as the platform my company SIPP is with (aegon) is the worse thing ive ever seen. You cant even pull up a graph of a fund from the portfolio view or see a P&L view.
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Tim D on 06/04/2018(UTC), Aminatidi on 06/04/2018(UTC)
Theo Shackleton
Posted: 06 April 2018 14:36:35(UTC)
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Can anybody help? I'm finding conflicting info about this online.

Is it possible to have my employer (once I have one) transfer my pre tax salary into my SIPP, and therefore save on tax and NI contributions? Or, do I have to transfer the post tax salary into the sipp myself and leave the platform provider to claim the tax relief?

Also, I understand that the limit for tax relief is £40,000. Does that mean I can put 40k in and then get 8k added in basic rate tax relief?

Also, this is a long shot. Nobody ever knows the answer to this and I cannot find it online. If I go to Canada to live and work for a while, would any growth within my sipp be safe from Canadian tax? I know that isa interest can be taxed there, but what about a sipp? Does anybody know a Canadian citizen who I could ask?

Thanks!
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