SIPP fee comparison inaccurate

I’m nitpicking, but it irritates me to find that the FT SIPP fee is taken from a normal bank account whereas AJ Bell take their fee from the SIPP. As a higher rate tax payer that means the AJ Bell SIPP fee is effectively 40% less than the FT fee. I.e. the comparison isn’t like for like.

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Hello, welcome to the board. I’m curious on your sums in your post and wonder if I’m missing something.

If as a higher rate tax payer you pay in £60, you would an additional £20 added in a month or so, to make it £80, then be able to reclaim another £20 from your tax return. Fees don’t really come into it at this point, so AJ Bell and FT are the same.

I’m not sure where the 40% savings on fees comes from, could you walk me through that in case I’m missing something?

In a comparison of the fee if you had a £10k pot then it’d work out as:
AJ Bell - 10,000 x 0.25% = £25 annually.
FT - 12 x 9.99 = £119.88
So FT is more on a smaller pot, purely on the SIPP fee

On a larger pot:
AJ Bell - 100,000 x 0.25% = £250 annually
FT - 12 x 9.99 = £119.98
FT is better for larger pots.

That’s not a true comparison though as even on an AJ Bell £10k pot, you’d pay £2.08 in SIPP fee per month, plus £9.95 per trade, plus 0.55% on the FX rate if it’s a non-sterling purchase.

I don’t know a lot about AJ Bell but I can see they offer regular investing at £1.50, which presumably is per trade. I’ve not checked to see if the investment universe is more restricted. Even using that it’s £2.08 plus £1.50 x however many ways you split your regular investment, say 4 for £6, plus the £2.08 for £8.08 total. I still don’t see the 40% saving though.

Historically the fees paid on portfolios have been hidden or at best murky and hurt portfolios as they detract from performance. That has partly led even Buffet claiming a better outcome for a lot of investors if an ETF with low fees. Having some of the fee outside the portfolio helps with performance but I get it’s not for everyone.

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The point he is trying to make is you get tax relief on the fee with AJ Bell. With Freetrade you don’t.

Hi tom, I’m not seeing where or how though. You don’t pay tax within the SIPP where the AJ Bell fee is being taken from. And the fee isn’t on the contribution where the tax relief kicks in.

Happy to be educated if I’m missing something.

You get tax relief when you put money into your SIPP.

So if the fee is take within the SIPP you benefit from the relief.

If it’s taken from outside you don’t.

Am I missing something?

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AJ Bell monthly fee is capped at £10/month.
As another person pointed out I’m referring to the point that the AJ Bell fee is effectively paid gross whereas FT fee is net tax.

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I think it’s a very good point, and long term FT should look to move the payment method to withdrawing funds from within the SIPP.

Or be clever and take the money from the bank put it in the SIPP, then take it from there… thereby giving the investor the relief.

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You don’t get tax releif on the fee. the fee is still £10

If you put in £10 you get relief of £4. you pay the £10 fee. you’re left with £4 from when you added the money.

If you pay the £10 fee externally, you pay the £10 fee. in each scenario there was zero tax relief on the fee. When you next add money to your SIPP you get £4 tax relief on £10 that you add.

In either case you are left with exactly the same amount of money, the fee wasn’t cheaper since no tax relief was applied to the fee.

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I’m not getting this. :see_no_evil:

Both prices are £10, but one costs you £6 as you benefit from the relief…?

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No matter how you pay the fee you’re always left with the same amount of money. Its only confusing because it appears like you benefit on the face of it, but you actually don’t benefit any more or less no matter what you do.

Tax relief is only paid on funding our SIPP, not on the fee.

If you pay the fee outside of the SIPP, you still gain tax relief the next time you put money into the SIPP.

If you pay the fee inside of the SIPP, you still gain tax relief the next time you put money into the SIPP.

In either scenario you’re left with the same amount of money, and the fee is always £10.

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There is no difference on the contributions. £6 becomes £8 and another £2 on your tax return becomes £10. AJ Bell and FT are the same at this point.

Part of the confusion may be the FT SIPP fee is £10 (£9.99)

Once that contribution is in the SIPP there is no further tax to pay or relief to be gained(appreciate there is an outstanding point on US withholding tax, but ignoring that for simplicity).

The AJ Bell fee coming out of your SIPP pot hurts performance, so you make say 5% investment returns in a year, less the 0.25% Bell fee. The FT fee is taken from outside the pot and therefore does not hurt performance.

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Ii dont like maths on a weekend :smiley:

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It took me a while to realise this and I switched it so that the fee is now taken out of my AJ Bell GIA - I just make sure the latter is topped up with cash to cover the fees.

I’m glad that the Freetrade SIPP will take its fee from bank account.

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Unfortunately that could get messy for those who contribute the annual allowance and FT then adds another £120 (over the year). You would be taxed at 55% (if I recall) on those £120.

I have an opinion about AJ Bell.

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would you be awfully kind enough to share please?

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I heard you were their number 1 fan

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I’m not sure which one of us is confused at the moment. Here is my thinking. As AJ Bell SIPP fee is capped at £10/month. So yes, if we only compare fees, AJ Bell and FT fees are the same (I think we can agree to ignore the £0.12 in EFTs favour).
However, the money that is relevant to most normal human beings is the money they receive after taxes (net), not what they receive before taxes are taken from salaries (gross). With FT, The net cost to me is £120. With AJ Bell, the net cost to me is £72 (if I’m a higher rate tax payer). You pay £96 into the SIPP, HMRC contributes £24. Entering the relevant numbers on a self-assessment tax return results in HMRC handing you back an extra £24. If you are concerned about loosing out on any gains from paying the £120 via the SIPP account, just pay an extra £96 into the SIPP.

For proof, try putting the following numbers into https://www.uktaxcalculators.co.uk.
Pension contributions: 96
Gross Income: >=50120
More options: select “Private Plan”
Hit “Calculate Now”

So back to my original (nitpicking) point: FT is not comparing apples with apples. Until I read the fine print, I assumed the SIPP fees would be taken from the SIPP account just as with AJ Bell. As that isn’t the case, the FT SIPP fees are the same pre-tax, but higher post-tax.

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So, if I understand correctly, when someone deposits with AJ Bell:

a) the contribution into the SIPP

Plus

b) the amount necessary to cover the fee cost

And by doing so, you benefit from the government contributing for both amounts, which leads to an increase in government contributions and, as a consequence, a decrease in the fee cost?!

Isn’t this limited to a maximum amount that can be deposited into the SIPP? Isn’t there a point when this is no longer possible to apply?

I’m currently with AJ Bell (but considering moving my SIPP to FT). Here’s what I like about AJ Bell:

  • Being able to register and take part in UK IPOs. IPOs are usually priced a little lower than the expected end price on the IPO day. As far as I can tell, with FT I have to join the IPO day frenzy.
  • Morningstar Portfolio X-Ray (an analysis report about your portfolio)
  • Real-time UK prices
  • Fees paid gross

What I dislike:

  • App isn’t great
  • No portfolio performance graphs. All I get is how much I’ve gained (or lost) on a particular stock since purchase) in % and £. Having said that, the FT performance analysis is pretty lightweight as well. I would like some analytics on the individual shares in my portfolio, so I can more easily decide what to keep and what to sell.
  • The £10 trading fee (which FT doesn’t have)
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