# Pension Levy and Bid Offer Spread



## Panacea (26 Sep 2011)

I can accept that a difference of up to 5% between bid offer spread on fund units is pretty standard in many cases however it is infuriating seeing units sold at the bid price to pay the pension levy whilst contributions are being used to purchase units at the higher offer price .... 

Rant over I guess


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## JoeRoberts (2 Oct 2011)

better than 5% has been available if you have been reading this forum for a number of yrs.
Levy is on the value of the fund to the holder and this is the offer price. So I see no argument here even though I hate the levy.


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## ClubMan (3 Oct 2011)

I don't understand the gripe either. Units are always going to be sold at the bid price which is often lower than the offer price. The fact that some units are sold to pay some charge/tax/levy is irrelevant as far as I can see.


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## Panacea (5 Oct 2011)

Why is it irrelevant that units are effectively bought and immediately sold for 5% less to pay some charge/tax/levy? In essence there should have been no need to sell units as the monthly pension contribution would have been enough to pay the levy.

There is a cash amount going in to the pension each month and that cash could have been used instead to pay the levy without having to sell any units.

What they effectively did was to take the contribution I made that month and used it to buy units which were then sold immediately for 5% less than they had just purchased them so they could realise cash to pay the levy.

Perhaps I am missing something but on a simplified example say I put into the pension €100 each month and my levy for the year was €95.  They could have used €95 of my contribution (of €100) that month to pay the levy with €5 left over to go into my pension fund. However what they did instead was to use the full pension contribution of €100 to buy the units for €100 at the offer price and then subsequently sold them all for €95 at the bid price.  The sales proceeds were then applied to pay the levy .... in this scenario there is now no €5 left over to go into the pension.


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## boaber (5 Oct 2011)

That might be OK in theory if you were looking at one or two policies.  The pensions providers will have tens of thousands of policies on their books, so having to calculate the levy amount and then wait for the next premium to arrive (if it does arrive) to pay for it would be an administrative nightmare.

Far more simple to run a job to calculate the levy amount at 30/06 and deduct the units from all policies at the same time.

Your solution doesn't take into account the policies that won't be paying another contribution (deferred pension, single premium policy, buy out bond etc).


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## SPC100 (5 Oct 2011)

I agree, that punters should be able to pay the levy out of "ex-pension" cash rather than suffer a bid/offer spread. Maybe write to your pension company?


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