Stocks & Shares ISAs

MSE_Amy · 15 April 2014 at 6:25PM

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jimjames · 15 April 2014 at 9:26PM

Great that there is finally a guide to S&S ISAs.

Apart from a typo in item 3 there are a few issues that may need to be thought about.

The guide is quite detailed on reasons and who benefits - why is this some philosophy not applied to the cash ISA guide too?

1) I TOTALLY disagree with this point. It is misleading and incorrect to state that a cash ISA should always be used. We know nothing of the individual circumstances; they may become a higher rate taxpayer, they may invest over time and then exceed the CGT limit - by then it is too late. If they already have sufficient cash then using S&S ISA makes sense.

Basic rate tax payers who won't exceed the annual CGT allowance and are investing in stocks & shares - not corporate bonds - should ALWAYS max their cash ISAs first.

2) I think it is also worth stating that there is no fixed term for a S&S ISA. It is usually stated that it should be held for 5 years or more but there is nothing to stop you getting money out earlier if you need it or if you have big profits. In some ways it is far more flexible than a fixed term cash ISA.

3) Worth mentioning structured products that may be sold by banks and the restrictions on them - fixed dates to cash in and costs etc.

innovate · 15 April 2014 at 11:37PM

My two pennieth worth on this, In summary, I am vastly disappointed with this MSE article and I hope that nobody will make investment decisions based on it.

MSE wrote:

Everyone in the UK over 18 has a £11,880 ISA allowance. You can choose to use all of this for a stocks & shares ISA if you want, or you can put up to half of it in a cash ISA and the rest in a stocks & shares ISA.

Everyone between 16 and 18 in the UK has a 2014-15 cash ISA allowance of £5,940 now, and £15,000 from July 1 onwards. In addition, under 18 year olds not entitled to a CTF are also entitled to a JISA, alongside an 'adult' ISA. MSE should have a detailed article about ISAs for kids and young adults.

MSE wrote:

As such, if you're looking to use your money within the next couple of years, you should probably stick to cash savings such as a cash ISA.

Not again, please........ When are we finally going to get rid of the apparent MSE obsession with "ISA at all costs"?

MSE wrote:

Should I use my cash ISA allowance or invest it all?
It depends whether you gain from the tax breaks above and if you're willing to risk your money investing. But in a nutshell:

- Basic rate tax payers who won't exceed the annual CGT allowance and are investing in stocks & shares - not corporate bonds - should ALWAYS max their cash ISAs first.

- Big investors, especially those putting money in corporate bonds, should ALWAYS max their stocks & shares ISAs.

- Only investing? ALWAYS max your stocks & shares ISA as it's often cheaper to invest within a stocks & shares ISA.

this is pretty shocking advice, I am afraid. Where are your considerations to the age of the investor, their access to an emergency cash fund, their need for their funds in the near term, their risk acceptance etc etc? Honestly, MSE, what you have published there is worse than what you get in the Daily Mail!

MSE wrote:

Investing in a stocks & shares ISA is a two-stage process. First you need to pick which provider to buy your ISA from, then you need to decide what investments to put it in.

you are right, it is a two stage process. Unfortunately, you got the two stages 100% the wrong way round. You first decide what you invest in, and then look at who offers you the best deal for those investments.

Further, there is no mention of workplace pensions or SIPPs. These are, for many people, very valid alternatives to S&S ISAs, particularly after the changes introduced in the last budget. Just looking at cash ISAs vs S&S ISAs is ignoring a full third of the options for putting money away. Also, it isn't necessarily an 'either' 'or' - a combination of some or all is perfectly feasible in many cases.

I am quite disappointed with MSE's suggestions about books and websites that discuss investments in details. There seems to be no appreciation that there are thousands of available investments.

MSE wrote:

Understand the charges of a stocks & shares ISA

very valid and important point. Shame MSE are not talking about dealing, exit, and incidental charges. All of which can amount to huge amounts.

MSE wrote:

Hargreaves Lansdown, the biggest provider, is now one of the most expensive

Well, yes and no. They may be, they may not be. It all very much depends on how much you have invested and in what you invested. (MSE, have you heard of snowman's spreadsheet that allows people to compare platforms, based on their investment profiles?)

MSE wrote:

Lots of investors also like Hargreaves Lansdown for the depth of knowledge it provides, such as its Wealth 150 guide

honestly, giving an implied endorsement to the HL Wealth 150 Guide. I am appalled.

MSE wrote:

Best Buys: New stocks & shares ISA provider

all affiliates. 'nuff said.

LOL, and the same for providers that allow transfers in.

oioisexy · 16 April 2014 at 9:55AM

Could someone please help me understand how the percentage platform charge is applied, i.e. Cavendish Online 0.25% fee. Is it a the point of opening a fund or at the end of the year? Will I be charged the full annual 0.25% if I decide to move my funds to another platform or is it pro rata?

Also while I'm here, how do I buy individual bonds? I'm looking on Cavendish Online and all I can find are funds of bonds. Am I missing something?

Thanks in advance.

SnowMan · 16 April 2014 at 10:06AM

innovate wrote: »

MSE, have you heard of snowman's spreadsheet that allows people to compare platforms, based on their investment profiles?

Thanks for the mention. For those coming here via the weekly email the link to the updated downloadable platform comparison spreadsheet is contained in this post.

Other comparisons of stocks and shares ISA platform charges that investors will find useful are

1. Justin Modray's excellent calculator at compare fund platforms.

2. The monevator broker comparison table

3. The langcat comparative ISA tables (scroll down the blog to the tables, it is currently the table in this blog post that is relevant)

Eric1925 · 16 April 2014 at 12:17PM

I haven't seen mention of the fact that whilst if you hold shares outside of an ISA you can use the tax that you have paid to the Government, as a donation to a charity using Gift Aid. But if your shares are in an ISA. the Government takes your tax and you cannot use it in an ISA. Definately a negative point if like me you have enough money to buy shares but are not wealthyenough to be in an upper tax level. Eric

Eric1925 · 16 April 2014 at 12:22PM

Oh dear!
This sentence;
But if your shares are in an ISA. the Government takes your tax and you cannot use it in an ISA.
Should read;
But if your shares are in an ISA. the Government takes your tax and you cannot use it as Gift Aid.

BobQ · 16 April 2014 at 12:35PM

I think the above comments are a trifle unfair. This is intended as guidance for the inexperienced.

For example, it is a fact that you cannot investing a fund unless you have a platform first. True that if you pick a platform first you may find the fund is cheaper on another platform but they do make the point that this might be the case.

SnowMan · 16 April 2014 at 12:53PM

oioisexy wrote: »

Could someone please help me understand how the percentage platform charge is applied, i.e. Cavendish Online 0.25% fee. Is it a the point of opening a fund or at the end of the year? Will I be charged the full annual 0.25% if I decide to move my funds to another platform or is it pro rata?

If you are using Cavendish (via Fidelity) then the charge is applied monthly I understand see

https://www.fidelity.co.uk/adviserservices/in-focus/funds-shareclasses/pricing.page

and click on 'tell me about the service fee'.

Also while I'm here, how do I buy individual bonds? I'm looking on Cavendish Online and all I can find are funds of bonds. Am I missing something?

Cavendish only have access to a funds supermarket and I don't think there is an option to buy shares, ETFs or gilts through them.

To buy gilts you need to use a platform or broker that does allow purchase of stocks and shares and ETFs which will usually allow purchase of gilts also.

For example I have a sharedealing account with First Direct and I can do a search on there for government gilts and purchase them just like shares. A cheap sharedealing broker like x-o would be a good option.

You can buy gilts direct from the UK Debt Management Office also see here but have never looked at how cost effective that would be.

See this monevator article for a discussion of whether to buy individual gilts or gilt funds.

Bear in mind that rates on best buy fixed interest ISA savings accounts are generally better than redemption yields on gilts of the same term.

wooder · 16 April 2014 at 12:53PM

BobQ wrote: »

I think the above comments are a trifle unfair. This is intended as guidance for the inexperienced.

For example, it is a fact that you cannot investing a fund unless you have a platform first.

Fundsmith ?

innovate · 16 April 2014 at 1:06PM

BobQ wrote: »

For example, it is a fact that you cannot investing a fund unless you have a platform first. True that if you pick a platform first you may find the fund is cheaper on another platform but they do make the point that this might be the case.

You are joking, are you. Your, and the MSE, approach is a bit like choosing a car dealer before you have even established whether you want a car or a push bike.

Giving inexperienced people the wrong advice is a terrible thing to do.

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