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  • FIRST POST
    • Embles
    • By Embles 17th Jul 17, 8:08 PM
    • 9Posts
    • 88Thanks
    Embles
    Hargreaves Lansdown LISA vs Vanguard ISA
    • #1
    • 17th Jul 17, 8:08 PM
    Hargreaves Lansdown LISA vs Vanguard ISA 17th Jul 17 at 8:08 PM
    Hi Everyone,

    I'm hoping someone far more knowledgeable than me will be able to explain this.

    I would like to try investing for the first time. I'm only putting a toe in the water (I like learning by doing!), so it will be £100/month. I am looking at opening a LISA, which would automatically give me an extra £300 a year, or just an ISA direct with Vanguard.

    The LISA with Hargreaves Lansdown comes with "a management charge of 0.45% on portfolios worth up to £250,000.". This is more than a Vanguard ISA would cost (the one I'm looking at is 0.22%). My question is, is that 0.45% charge taken from my monthly payment, everything in the account, profits from the investment, or some other combination of what's in the account?

    If the HL fees are going to swallow the LISA government bonus then I'll just go with Vanguard direct, but if not then the LISA might be a safer bet, but I don't know which information I need to calculate this.

    Thank you very much for any help!
    Mortgage Overpayments: £1720 July 2017
Page 1
    • jimjames
    • By jimjames 17th Jul 17, 8:13 PM
    • 11,940 Posts
    • 10,342 Thanks
    jimjames
    • #2
    • 17th Jul 17, 8:13 PM
    • #2
    • 17th Jul 17, 8:13 PM
    You need to compare like with like.

    HL annual charge (platform fee) is 0.45%. That's taken every year from the total in your account. The equivalent with Vanguard is 0.15% so HL is 3x as expensive. For £1200 per year investment that is still only £5.40 per year vs £1.80 but after 10 years it becomes a little more significant as your pot is now £12000 and the fee is £54 vs £18.

    However the fund you invest in also has an annual fee, most likely this is 0.22% with the fund you looked at with Vanguard. This is in additional to the platform fee.

    Either way the fees won't dent the bonus in the way you suggest
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Embles
    • By Embles 17th Jul 17, 8:26 PM
    • 9 Posts
    • 88 Thanks
    Embles
    • #3
    • 17th Jul 17, 8:26 PM
    • #3
    • 17th Jul 17, 8:26 PM
    Thank you. So if I understood you right, with the annual fees as well as the platform fee I'm looking at HL (0.45 + 0.22) 0.67% versus Vanguard (0.15 + 0.22) 0.37% each year on the total in the bank account.

    But if the total in the bank account includes the government bonus, how will the bonus not be dented? Or do you just mean that the percentage isn't big enough to completely get rid of the bonus?
    • TheShape
    • By TheShape 17th Jul 17, 9:52 PM
    • 989 Posts
    • 736 Thanks
    TheShape
    • #4
    • 17th Jul 17, 9:52 PM
    • #4
    • 17th Jul 17, 9:52 PM
    It's important in this case to assess not only the difference in fees but also the difference between the products.

    A LISA is a very different product to a 'regular' S&S ISA with positives (the government bonus) and negatives (penalties for withdrawal before age 60 if not used for a qualifying property purchase).

    I think you'd be best to look at you investing options in the context of your entire financial situation. You might need to start a post where you invite forum members to evaluate your entire financial situation re property, mortgage, cash savings, pension provision etc. Might sound more complicated but you need to be sure a LISA is right for you.
    • TheShape
    • By TheShape 17th Jul 17, 9:57 PM
    • 989 Posts
    • 736 Thanks
    TheShape
    • #5
    • 17th Jul 17, 9:57 PM
    • #5
    • 17th Jul 17, 9:57 PM
    Thank you. So if I understood you right, with the annual fees as well as the platform fee I'm looking at HL (0.45 + 0.22) 0.67% versus Vanguard (0.15 + 0.22) 0.37% each year on the total in the bank account.

    But if the total in the bank account includes the government bonus, how will the bonus not be dented? Or do you just mean that the percentage isn't big enough to completely get rid of the bonus?
    Originally posted by Embles
    You've got the fees worked out correctly. Not a bank account though.

    Receiving the bonus will increase the fees. If for example you invest £1000 and immediately receive a 25% government bonus, your fees will also increase by 25% as the fee is levied on your investment balance. Likewise, if the value of your investment falls, so will the fee.
    • cloud_dog
    • By cloud_dog 17th Jul 17, 11:27 PM
    • 3,101 Posts
    • 1,677 Thanks
    cloud_dog
    • #6
    • 17th Jul 17, 11:27 PM
    • #6
    • 17th Jul 17, 11:27 PM
    If for example you invest £1000 and immediately receive a 25% government bonus, your fees will also increase by 25% as the fee is levied on your investment balance. Likewise, if the value of your investment falls, so will the fee.
    Originally posted by TheShape
    HL don't (currently) include cash as part of the chargeable (fund) amount.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • TheShape
    • By TheShape 17th Jul 17, 11:48 PM
    • 989 Posts
    • 736 Thanks
    TheShape
    • #7
    • 17th Jul 17, 11:48 PM
    • #7
    • 17th Jul 17, 11:48 PM
    HL don't (currently) include cash as part of the chargeable (fund) amount.
    Originally posted by cloud_dog
    I was assuming investment of the bonus as you wouldn't wish to leave it in cash for particularly long.
    • jimjames
    • By jimjames 17th Jul 17, 11:56 PM
    • 11,940 Posts
    • 10,342 Thanks
    jimjames
    • #8
    • 17th Jul 17, 11:56 PM
    • #8
    • 17th Jul 17, 11:56 PM
    I was assuming investment of the bonus as you wouldn't wish to leave it in cash for particularly long.
    Originally posted by TheShape
    That raises an interesting question, I'd assumed (maybe wrongly) that the bonus was invested in the same way as the original money. I have a SIPP with HL and the tax reclaim is automatically invested not left as cash
    Remember the saying: if it looks too good to be true it almost certainly is.
    • TheShape
    • By TheShape 18th Jul 17, 12:07 AM
    • 989 Posts
    • 736 Thanks
    TheShape
    • #9
    • 18th Jul 17, 12:07 AM
    • #9
    • 18th Jul 17, 12:07 AM
    That raises an interesting question, I'd assumed (maybe wrongly) that the bonus was invested in the same way as the original money. I have a SIPP with HL and the tax reclaim is automatically invested not left as cash
    Originally posted by jimjames
    Perhaps I was also assuming the same as my tax reclaim is also automatically reinvested in my HL SIPP. I can't remember if there were options given when setting up the account.
    • badger09
    • By badger09 18th Jul 17, 10:30 AM
    • 5,112 Posts
    • 4,325 Thanks
    badger09
    That raises an interesting question, I'd assumed (maybe wrongly) that the bonus was invested in the same way as the original money. I have a SIPP with HL and the tax reclaim is automatically invested not left as cash
    Originally posted by jimjames
    Then you must have chosen that option jj. (and TheShape)

    I too have a SIPP with HL but my tax relief just sits in cash until I decide what to with it.
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