Keep ISAs where they are or pay off mortgage?

suemoo

We've had two Legal and General £7,000 fund(?) ISAs for about six years. The value dropped massively and has since crept back up at a sickeningly slow rate to now be worth £6,800 - near enough what we put in in the first place. Now we've virtually got our money back, we're in a bit of a quandry as to what to do. Should we leave them where they are and see if they carry on creeping up? Should we pay them off our £77,000 mortgage? We're already paying extra on the mortgage to try and get it down in the hope of moving in the near future but we're not sure where this ISA money will work best for us. Any advice gratefully received!

dunstonh

Once you take the money out, you have lost that ISA allowance on that year forever.

L&G are not known for particulary well performing funds. Even their cheap tracker, which is good on low charges, is limited by the fact it invests in a below performing sector.

You could consider a transfer of the ISA to alternative funds. I mean, even those I invested at the highest post before the crash are well into surplus now. The fact you havent broken even yet indicates a poor portfolio selection. That is not a fault of the ISA as you choose the sectors and funds. However, you can remedy that.

suemoo

Sorry, I'm a joke when it comes to finances (as illustrated by the crap fund I invested in). What do you mean when you say I've lost ISA allowance for that year? Are you saying you'd advise keeping the money in an ISA as opposed to paying it off mortgage? And if you'd advise transferring to an alternative fund - any recommendations (or are you not allowed to recommend anyone specific on this site?) Sorry to be so slow on the uptake, I never really take much notice of these things. I only am now because I have a tax bill/no cash and it's made me sit down and actually look at my finances for once! Thanks for replying so quickly.

dunstonh

ISAs have an annual allowance. If you dont use that allowance, it is lost forever. If you pay off part of the mortgage with those ISAs, you have lost the tax free side of them forever. You cannot get it back as you will need to start again. The tax free status of ISAs can be very beneficial in the long term. Especially later in life when looking towards retirement.

And if you'd advise transferring to an alternative fund

no. funds, not fund. Investing in just one fund is the old fashioned way and nowadays people have realised that usually results in under par performance than investing across the sectors (different areas of investment as to not put all your money in just one place).

any recommendations (or are you not allowed to recommend anyone specific on this site?)

We are not allowed to make any recommendations here i'm afraid.

ISAs are just a product (referred to as tax wrapper but dont worry about that now). The ISA doesnt make or lose money. Its the investment you place inside the ISA that does that. Sticking your money in just one area is risky. Especially if that area is the UK. The UK is historically best performing main sector once every 5 to 7 years. So, stick all your money in the UK funds and you will be top once or twice in a 15 year period.

My choice when placing investments is to spread them as wide as possible. I placed two ISAs on Friday and used 13 funds across 8 main sectors and 13 sub sectors.

A way of looking at it is that there are thousands of funds out there. Which is going to be the best in the future? If you have one fund the chances of best at or near the top are slim. Have more funds and the chances improve. If different sectors perform at different times, having your money in as many as possible allows you to benefit from that.

I fear a bit of that may sound technical and i dont want that to put you off. The important thing is that to resolve that takes nothing more than a simple form and if done on no initial commission basis could cost nothing to resolve. I dont think you will find many here who wouldnt encourage you to look into the alternative fund/sector options.

innovate

dunstonh, presumably there are charges to consider when you transfer to different funds? From your experience, was is the rough ballpark figure for those charges?