I recently got an email from AJ Bell YouInvest, through would most of our ISAs/SIPPs are held.They said that instead of the quarterly fees being deducted from each account, I could open a General Investment Account (GIA) and have the fees taken from that.It was a nifty idea since we have some accounts with non-dividend paying ETFs that are cash negative! Meaning it looks like our finances are not in shape!
In fact, when it first happened to my SIPP, I transferred £20 from my ISA to cover the shortfall. Afterwards I discussed with AJBYI on what they do with accounts with a “negative cash flow position” as I was scared that they would sell 1 ETF share of VWRL for £60 and charge me £9.95 as a trading fee.
How the Fees add up
My wife and I both have ISAs, LISAs and SIPPs with AJBell YouInvest (that’s long to type!) and we are charged £30 each for the ISAs & LISAs (£120) and £100/£60 for the SIPPs (£160). Total cost per annum is £280. The current fees that they have around among the lowest in the market for UK investors. If I keep using them for the next 25 years we are talking about £7,000 (and that’s assuming they don’t raise prices – but the trend for fees is downwards)
That’s a lot of money at the end of the day (or year) but it’s a competitive price based on what’s available elsewhere and I like using them. Other providers are out thereBTW.
Jam Today or Jam Tomorrow?
The question that I have is whether it’s better to keep paying individual fees out of each account or should I open a GIA to cover the fees. I would mean that I am indirectly boosting my tax sheltered ISA assets and tax sheltered LISA and SIPP assets. The £7,000 boost is quite significant but it’s paid out of free money that I have now. The ISA savings are modest (£60/annum) and the real benefit is in that it allows your LISA and SIPP to grow more.
ISA: I currently have more money than I can fill my ISAs with, so it makes sense to pay for the fees with money that might otherwise be taxed. Tax saving
LISA: However, the LISA (which I’ve written about here) has a 25% bonus paid on the way in meaning that I don’t see any problem in paying those fees out of that money. Do nothing
SIPP: For the SIPP, the money is already paid in and tax has been deferred. The fees reduce the pension pot. For me to pay the fees outwith the SIPP, the saving I make is that the £160 a year in fees. That £160 when taken out of the SIPP would be taxed at around 85% (read this for more info.) leaving £136. Paying now costs me £160 vs. £136 effectively if the SIPP pays. Do nothing
In my head, I think it’s better to pay the fees in the SIPP out of SIPP money because the tax position is favourable.
Other factors include 1) my pensions are better funded than my FIRE bridge 2) I get better tax relief into the pension at the moment than I when I take the money 3) This might help towards lifetime allowance – not a problem now but who knows.
So there you have it, I’ll see if I can set-up the GIA for the ISA fees and boost our effective ISA allowance by £60 a year. Assuming that £60 is used to invest in an ETF paying a 4% dividend and tax is paid at 7.5% that’s an 18p saving a year. (Mmm.. thinking about it this way, this comes way down the list of GFF’s priorities) Still, without examining options and going off auto-pilot, I wouldn’t know if this is a good thing or bad thing and all these little savings add up after all.
If you read till the end
If anyone is interested in joining AJ Bell YouInvest and opening an ISA/SIPP with them, then there’s a promotion on at the moment. I wouldn’t recommend them if I didn’t think that they were good and they offer a very good service overall. If I recommend you then you’d get a copy of “the DIY Investor” which is an excellent book – I read mine cover to cover and have it in my bookcase at home.
I’d get a £100 referral bonus of which I’ll share £50 with you since I’m a good guy. Just let me know if you’ve signed up and we’ll both win-win.