Choose to pay SIPP fee from the SIPP account

If possible could you do this with Freetrade+ fee as well please? Ultimately it is still a service related to the SIPP so that feels reasonable.

It sounds like a tiny thing but this could reduce the household (x2) cost of Freetrade from £408 to £245 (+FX) without impacting Freetrade at all. That might tip the balance for few more people on the fence.

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There is a class of people for whom your analysis does not hold.

Those who use up all of their allowance would prefer to pay fees from outside of sipp as that effectively becomes extra money they can keep in the sipp wrapper without sacrificing investment performance.

For example if one only has £4,000 SIPP allowance and they contribute all of it, they cannot top up any more money into SIPP and thus would be forced to sell investments to cover the fees and thus experience drag on their performance. Hence paying fees from regular funds is beneficial, and there is no tax loss as the full tax allowance has been used up.

Also inheritance issues may come into effect. Funds in the SIPP are not part of the estate, whilst money outside of it are.

I prefer to see pure investment growth in the accounts, and pay fees from non-wrapper money.

That’s a good point, I guess the better user story would be:

Allow the user to choose card/SIPP balance to fund their fees (SIPP & Freetrade+) from.

I can’t really think of a case where you’d want to fund from ISA/GIA except for convenience, but maybe expanding the options to also cover that would be a consideration.

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You can make contributions to your SIPP of up to £40,000 per tax year. If someone has only £4,000 of allowance left that means this person has already contributed £36,000 in this tax year.

I’m not sure this person is the targeted audience of FT. This would probably be a very high earner.

FT caters for the small investor. The discount through the pension relief helps.

But if someone is really concerned about this then I suppose options could be provided:

A. FT attempts to take the SIPP fee from available funds within the SIPP account itself and on the absence of funds use a credit card instead as fallback.

B. FT takes the SIP fee from a credit card outside the SIPP.

Edit: I have changed the title from should to have the ability to choose which option.

Not everyone. There is reduced annual allowances, and tapered allowance, and carryover, and money purchase allowance…

Also one only receives tax brake to the extend of taxable income. Thus most will not have 40k of contributions eligible for tax benefit.

One might have three years of carryover and thus able to contribute 160k, or only have 4k allowance in many circumstances. Some of which can be retrospective.

It’s not just about high earners.

I.e. if one is basic tax payer making £15k they get tax relief on just £2.5k max. If they manage to put that away into SIPP they are better off paying fees from their regular cash.

In fact FT seems to target quite high value pots, potentially with very small top ups.

At £120 a year, FT is only competitively priced for pots of more than £80,000. As otherwise Vanguard is a better option with 0.15% account fee.

Honestly FT fee structure and tax implications are a lot more nuanced than what you imply. And not everyone’s tax position matches your scenario. Only a marginal subset.

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Continuing the discussion from Transfer SIPPs from other providers:

I’m with prudential -

  1. Any one know what sort of exit fee I would have to pay?
  2. I must be able to pay from the exiting pension pot though so pay in the sipp because I don’t earn enough to pay in any more have FT set this up yet?

Please start a separate topic, as it is not related to how Freetrade could/should charge Freetrade account fee.

Also many large providers have many types of accounts and it will be between you and Prudential to figure out your exit fee and how to pay them. So I don’t think you will get a straight forward answer about it. Even if somebody else did similar transfer with Prudential.

Did you read the 2nd ?

The second question makes no sense. At the moment FT only takes payment for SIPP account using debit cards… As in outside of the sipp.

Exit fees are processes by Prudential. Talk to them if they can accept payment by selling funds in the sipp or take an outside of the sipp payment…

So yeah, I did read your questions and nobody here can help you with your queries and the idea/feature requested in this topic is irrelevant to your sipp questions.

Is FT considering allowing the fees to be deduct from SIPP account? if not, any idea why not?

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Because the current process is very clean and works well - Debit card. No need to change it

Of course there is a need to change it. That’s why most competitors debit SIPP fees from the SIPP, for tax reasons.

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Although I actually voted for this option I wouldn’t use it but I do think it would be handy especially if someone hit hard times and the monthly payments became an issue.

Of course, it is gets complicated, you would need to keep cash in it or FT would then have to decide what to sell and then that may end with negative reactions.

This makes me think that both “with and without” have good arguments and TBH the FT team probably made the correct choice for people in the long run.

Edit - I hate direct debits so would prefer to pay in advance by the year for SIPP and Plus but that’s a different discussion :joy:

“Of course, it is gets complicated, you would need to keep cash in it or FT would then have to decide what to sell and then that may end with negative reactions.”

  • Competitors already do that. Lots of warnings while SIPP is overdrawn then auto-sell just what’s needed to cover fees. It’s not difficult to understand and accept for clients.

“This makes me think that both “with and without” have good arguments and TBH the FT team probably made the correct choice for people in the long run.”

  • payment from outside SIPP makes no sense. There is nothing for it and that’s why competitors by default debit from inside SIPP.
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I agree the default should be in the SIPP and I’m a strong supporter of this idea, however there is a valid scenario for someone who uses the SIPP allowance and thus may want to pay from outside the wrapper to maximise the tax-protected amount. I imagine that’s fairly rare among FT users though.

Money in SIPPs has not paid tax and money outside of it is supposed to have paid tax so there is no economically valid use case for wanting to pay from after-tax money. Your reasoning is only relevant for ISA, not for SIPP.

That’s not true, the SIPP shelters you from capital gains / dividend tax. If you hit your limits and you value 60p (with tax free gains) > £1 without then it’s possibly sensible (depending on your LTA). I agree that’s very niche, but for some people it could be relevant.

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Freetrade needs to offer the choice to pay from inside or outside the SIPP. Cannot be hard if AJ Bell do it. It’s costing users more and some might have a sizeable pension but struggle to pay £120 a year from their cash flow when it should be from SIPP growth proceeds.

Freetrade SIPP is a half baked product until they sort this out (and obviously offer drawdown, but my guess would be that 99% of users can afford to wait a while for that feature) .

Still some work for Freetrade to complete before ticking off SIPPs imho

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One reason it would be good would be for people who may hit hard times and don’t want a monthly outgoing so the pot could pay it from hopeful profit.

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May be a question to ask on the next AMA…

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