New S&S ISA

sammyjammy

Hi,I have an index tracker fund with M&G and recently asked myself why I didn't have it in an ISA wrapper, after querying this with M&G it turns out I have to sell my shares and then buy them back to be able to hold them in the ISA. What I cannot work out is if I have lost out financially by doing this, to me it seems I have lost out short term but in the medium to long term when the markets recover I will have gained, details below if anyone can help:

22/1 Withdrawal 456.742 shares @ 50.710

23/1 Bought 617.489 shares @ 37.510

Is it usual for the shares to fluctuate so hugely in a day? (I know things are tricky at the moment but I thought the market was a bit less volatile lately, perhaps I'm just very uninformed

dunstonh

You havent lost a penny unless you are a higher rate taxpayer. Tracker funds dont benefit from the tax free status (in regards to income) that a managed fund spread would (fixed interest sector being the area that benefits).

Is it usual for the shares to fluctuate so hugely in a day?

Its not uncommon to see movements of 1-3% in a day. Less frequently but does happen are movements of upto 10% (as seen last year and most crashes which occur on average once every 7 years). Anything above that be unusual.

Are you buying with a bid/offer spread as that would possibly account for a chunk of the difference?

CLAPTON

you sold accumulation units
and bought inc unit
see

http://www.mandg.co.uk/Consumer/FundInformation/Prices/index.jsp

sammyjammy

dunstonh wrote: »

You havent lost a penny unless you are a higher rate taxpayer. Tracker funds dont benefit from the tax free status (in regards to income) that a managed fund spread would (fixed interest sector being the area that benefits).

So does that mean there is no benefit in having it within an ISA? Oh silly me and I thought I was doing the sensible thing!

[/quote]Are you buying with a bid/offer spread as that would possibly account for a chunk of the difference?[/quote]

I thought I was quite savy financially but obviously not when it comes to stocks and shares. I'm not sure what you are asking but I started investing £30 a month last Jan and have just sold and reinvested the £231 current value lump sum into the ISA, I'm now investing £50 permonth into the tracker via the ISA.

sammyjammy

CLAPTON wrote: »

you sold accumulation units
and bought inc unit
see

http://www.mandg.co.uk/Consumer/FundInformation/Prices/index.jsp

Aah I see, thanks for that although I'm still not sure why the differnece, surely they are two separate funds or am I being stupid?

CLAPTON

sammyjammy wrote: »

So does that mean there is no benefit in having it within an ISA? Oh silly me and I thought I was doing the sensible thing!

Are you buying with a bid/offer spread as that would possibly account for a chunk of the difference?[/quote]

I thought I was quite savy financially but obviously not when it comes to stocks and shares. I'm not sure what you are asking but I started investing £30 a month last Jan and have just sold and reinvested the £231 current value lump sum into the ISA, I'm now investing £50 permonth into the tracker via the ISA.[/quote]


no shares/ unit trusts benefit from tax free dividend as none can be reclaimed .. so unless you are a 40% tax payer then your would have been liable for an extra 25% tax on the dividend.

In principle you would benefit from any capital gain being tax free in the ISA .. but you have a 9,600 allowance anyway but hopefully you might benefit eventually


for modest investments S&S ISAs offer very little benefit to non 40% tax payers and the charges are generally higher.

CLAPTON

sammyjammy wrote: »

Aah I see, thanks for that although I'm still not sure why the differnece, surely they are two separate funds or am I being stupid?

well yes, I suppose they are two different funds although if you chose to reinvest the dividend then it works out the same.

sammyjammy

I'm not a 40% tax payer, far from it, looks like I made a bit of a mistake then, lessons learnt and all that

dunstonh

fixed interest funds and funds that have interest payable within their holdings benefit from being inside an ISA. They can claim the tax back on the interest. So, there is a benefit. Just not on 100% equity funds.

Long term there is a benefit if you get into CGT territory. Or if you intend to switch to income later or get a more balanced portfolio than just using a tracker.

sammyjammy

Thanks again, you've put my mind at rest, I really should find these things out before I make a move in future. I don't think I'll ever move into CGT territory but you never know!!

Sam