L&G Stocks&Shares ISA

There are not many other costs to consider. If you use a fund supermarket platform like HL or CS (latter is cheaper) you will be exposed to a cost for using the platform and then also the ongoing running costs of the funds you choose to buy. the latter will be taken by the fund manager directly out of the fund's assets while the former will be billed explicitly to you by the platform.

Different providers structure their fees in different ways, e.g. a percentage of your total pot, charged every month or quarter or year; or a fixed flat fee per month or quarter or year plus an amount every time you invest new money or change fund; or some combination.

If you just want general exposure to worldwide equity, bond and real estate markets and are happy to use trackers to take that exposure (I see half of your current investment is through some sort of tracker), you could do worse than buy an L&G "multi-index" fund which is a multi-asset fund investing cheaply and globally with various risk levels available (e.g. multi-index 7 is likely to give higher returns but higher volatility than multi-index 5 over the longer term). Other similar products are available and I'm only suggesting L&G because you have heard of the name of that fund manager. The total cost of fund plus platform using that product is well under a percent.

Obviously it depends what exactly you want to invest in. For example, half your current investment is invested 'ethically', which means you are keen to restrict your potential returns by telling the investment manager to avoid certain industries and sectors that he feels are less 'ethical' based on some arbitrary and subjective measure of morality. However, the other half of your investment is in a tracker which by its nature throws most of your money into the biggest companies in a given stock market with no active management and no regard for subjective views of 'ethicality'. So overall you are still investing in the companies which you told the first half of your portfolio to avoid.

The 'what funds should I consider investing in' is a minefield as there are several thousand of them and it's not a question that is easily answerable. If you went to see an independent adviser (which is not at all affordable with the amount of money you are considering investing) they could give you the pros and cons, but that is a regulated activity. Here the best you can hope for is a bit of guidance. You say you want higher risk for the longer term. So, if you were using a 'single fund investing as a one-stop-ship in multiple international asset classes right out of the box' like L&G Multi-Index or Blackrock Consensus or Vanguard Lifestrategy, you would go for a version with more equities and lower bonds rather than vice versa.

At the moment you have ~£7k of investment and if you keep plugging away with the £50pm and get some investment growth you will be at £10k (to keep the numbers simple); the platform fee at HL is 0.45% or £45 versus Charles Stanley at £25. So, that extra £20 a year is not going to break the bank but seems unnecessary to give it to HL when you don't have to and you do not value 'great customer service' because you are only investing in a single fund via direct debit and never have any reason to call them.

Another option, given you probably don't need the functionality of a 'fund supermarket' with 2000 fund choices in your portfolio, would be to go direct to the fund provider. This may mean you cut out a layer of platform costs but the admin has to be paid for somehow so there may still be an annual admin fee or simply a higher running cost of the fund. L&G (again, only because you mentioned them, others are available) is an example of a fund house that offers its own ISAs direct to customer.

Really the only thing to avoid if you want to save costs is going through a bank or building society like Nationwide because, generalising, they will end up making quite average funds available to you at high cost or quite poor funds available to you at average cost.

Yes, the platforms give you a cash account within the ISA where your new contributions go before they're invested or your disposal proceeds go when you sell, or your dividends go if you have the Income version of a fund and it pays you periodically and you haven't invested it yet.

If this cash bit is completely empty when your monthly or quarterly or semiannual platform fees are due, they will sell a few units from your investments to raise the money to cover the charges. And they reserve the right to give you an extra admin fee if you create that hassle for them.

Of course, you could just sell a bit of your fund manually to raise the money before you need it, or simply not spend some of your contributions, so you're never caught short.

droopsnoot wrote: »

Picking up on this I had a look at my own Nationwide S&S ISA - because I've been drip-feeding that into this tax year as I forgot to cancel the monthly payment, if I'm going to put any more into an S&S ISA this year it will have to be here.

Just because you have been putting money into an s&s ISA with a particular provider for the first half of this tax year, doesn't mean that money, or any more money you choose to invest "will have to be here".

Having determined that the offering is poor, your obvious solution is not simply a choice between continuing to contribute to that poor offering, or "waste it into a cash ISA". Why not transfer it to a different S&S ISA provider instead?

TheShape wrote: »

Are the S&S ISA rules not the same in that you can transfer them to another provider and then continue to pay in?

My intention is to complete a transfer to CSD and then continue adding funds.

Yes, you can indeed do that. The main reason places like nationwide get away with charging the high fees that they do, is because people are generally lazy and don't bother looking at the details of their investment (e.g. only have it because they forgot to cancel it); or don't do any basic research to realise that they could transfer it to a better one at all, or that maybe they could do that immediately; or don't do any research to even realise that better ones exist (e.g. just use the place that gives them their bank account and assume the price must be the 'going rate').

If you look at the page of 6 standard options for a new investor at Nationwide today:

http://www.nationwide.co.uk/products/investments/our-investment-funds/investment-funds

The current version of the L&G tracker trust (class N) has running costs from L&G of only 0.06%. It is cheap as chips as it is a specialist fund only investing in one country's stockmarket and putting nearly all of its money in the very biggest companies. So, not suitable to be anyone's entire portfolio - due to its specialist nature and not having a good spread of industry sectors or geographies - but basically it is dirt cheap to run the fund and the tracker market is very competitive these days so charges have come down significantly in recent years.

So, management and admin of the fund itself is low cost. The expensive bit is having Legal&General's IPS administer your investment, handling subscriptions, redemptions, fund switches, reporting and customer service (your online login), HMRC compliance and whatnot. For this they charge 0.31%

And then on top, just for fun, Nationwide charge 0.4% for the oversight of their "investment committee" who basically decide that the few L&G funds they introduce you to are broadly fit for purpose in terms of doing what they say on the tin and being suitable for retail investors. It's a huge annual fee for a middleman considering they are only giving you general information and not tailored advice like you'd get from an independent financial advisor at a similar cost (on large enough investments).

So with Nationwide I would end up paying close to 0.8% for the latest version of the Tracker Trust or 1% for a FTSE World tracker, even though the underlying funds cost under 0.1% or under 0.3% to run and the IPS platform fee of 0.31% is not much worse than Charles Stanley at 0.25% or TD Direct at 0.3%. But the total cost is so much more than that, because Nationwide grab a huge slice for themselves, of whatever their customers buy, because their customers don't know any better.

Nationwide would say they are doing a valuable service which costs them money, and to be fair, many of their customers wouldn't have a clue where to start if their trusted bank or building society didn't help them out, leaving people worse off financially by never investing at all. But the 'value' you get from NW at 0.4% could be got for free through your own research if you're willing to put the effort in.