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  • FIRST POST
    • Confuciusone
    • By Confuciusone 17th Mar 17, 5:23 PM
    • 16Posts
    • 3Thanks
    Confuciusone
    Accumulation or Income
    • #1
    • 17th Mar 17, 5:23 PM
    Accumulation or Income 17th Mar 17 at 5:23 PM
    Hi, I've just opened a H & L SIPP with first £2880, choosing 4 funds from there DIY Master Portfolio 150 funds taking a chance with Adventurous, to get me started, wanting medium term growth.

    Noticed one fund is Income with a income reinvestment charge of 1% selected minimum £100, before investing income fee £1.

    Is it better to avoid Income Funds in favour of Accumulation Funds.
Page 1
    • dunstonh
    • By dunstonh 17th Mar 17, 6:17 PM
    • 87,325 Posts
    • 52,508 Thanks
    dunstonh
    • #2
    • 17th Mar 17, 6:17 PM
    • #2
    • 17th Mar 17, 6:17 PM
    choosing 4 funds from there DIY Master Portfolio 150 funds taking a chance with Adventurous
    That is rather overkill for just £2880 isnt it? Wouldnt a simple multi-asset fund be better for such a small amount? You appear to have fallen for marketing.

    its a bit daft. If an IFA was to do that with such a small amount, the FOS would likely call it a mis-sale. DIY providers do it and as there is less consumer protection, they get away with it.

    Is it better to avoid Income Funds in favour of Accumulation Funds.
    Personally i prefer inc units as it feeds the cash account and makes re balancing easier. However, it makes little difference. You will just need to keep a couple of percent in the cash account and ensure when you rebalance the funds, you keep the cash topped up if you use acc units.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • zagfles
    • By zagfles 17th Mar 17, 8:59 PM
    • 11,631 Posts
    • 9,615 Thanks
    zagfles
    • #3
    • 17th Mar 17, 8:59 PM
    • #3
    • 17th Mar 17, 8:59 PM
    That is rather overkill for just £2880 isnt it? Wouldnt a simple multi-asset fund be better for such a small amount?
    Originally posted by dunstonh
    Why? What difference does it make, unless there are flat (rather than %) charges on the funds? £2880 or £28000 would still grow in the same proportion.
    • zagfles
    • By zagfles 17th Mar 17, 9:04 PM
    • 11,631 Posts
    • 9,615 Thanks
    zagfles
    • #4
    • 17th Mar 17, 9:04 PM
    • #4
    • 17th Mar 17, 9:04 PM
    Hi, I've just opened a H & L SIPP with first £2880, choosing 4 funds from there DIY Master Portfolio 150 funds taking a chance with Adventurous, to get me started, wanting medium term growth.

    Noticed one fund is Income with a income reinvestment charge of 1% selected minimum £100, before investing income fee £1.

    Is it better to avoid Income Funds in favour of Accumulation Funds.
    Originally posted by Confuciusone
    You'd be best avoiding income reinvestment charges, so if you don't want to take any income, you may as well use accumulation units. There are funds called "income" funds which also have accumulation units as well as income units, the "income" in the name usually means they target dividends rather than capital growth.
    • dunstonh
    • By dunstonh 18th Mar 17, 12:06 AM
    • 87,325 Posts
    • 52,508 Thanks
    dunstonh
    • #5
    • 18th Mar 17, 12:06 AM
    • #5
    • 18th Mar 17, 12:06 AM
    Why? What difference does it make, unless there are flat (rather than %) charges on the funds? £2880 or £28000 would still grow in the same proportion.
    Originally posted by zagfles
    The OP is picking a handful of single sector funds. Those funds need to be rebalanced. Is it worth all that effort on £2880. Its not worth it on £28000 either.

    You'd be best avoiding income reinvestment charges, so if you don't want to take any income, you may as well use accumulation units.
    Or pick a platform where there is not an issue.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • zagfles
    • By zagfles 18th Mar 17, 9:33 AM
    • 11,631 Posts
    • 9,615 Thanks
    zagfles
    • #6
    • 18th Mar 17, 9:33 AM
    • #6
    • 18th Mar 17, 9:33 AM
    The OP is picking a handful of single sector funds. Those funds need to be rebalanced. Is it worth all that effort on £2880. Its not worth it on £28000 either.
    Originally posted by dunstonh
    What, half an hour or so once or twice a year to rebalance is too much effort for you?
    Or pick a platform where there is not an issue.
    Trouble is most other platforms have fixed annual charges, which wouldn't be good value for a SIPP worth only a few thousand. Think Fidelity have pure % charges but not sure if they have reinvestment charges. But problem is easy enough to solve - use accumulation units if you want dividends reinvested.
    • Confuciusone
    • By Confuciusone 18th Mar 17, 9:53 AM
    • 16 Posts
    • 3 Thanks
    Confuciusone
    • #7
    • 18th Mar 17, 9:53 AM
    • #7
    • 18th Mar 17, 9:53 AM
    Thanks all for your comments and advice.

    I opened a SIPP, put a small amount in to get a feel and learn how it all works, to decide if transfering my wifes £100k pension pot to a SIPP is an option for us.

    The more I learn the more complicated it gets.
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