ISA charges alert

EdInvestor

Thanks Whiteflag

That's so absolutely horrendous it should be framed and hung on the MSE virtual wall.

whiteflag_3

EdInvestor wrote:

Thanks Whiteflag

That's so absolutely horrendous it should be framed and hung on the MSE virtual wall.

Is that it! A bit disappointing after I spend half an hour running off the various quotes and thats the best you can come up with.
:rolleyes:
To my mind 0.3% more RIY doesnt constitute "an appalling ripoff" product, perhaps just not the best value

Still think the original Telegraph article was a load of old tosh, as I said this is not a new product.

EdInvestor

3% + 0.5% trail

Perhaps you'd like to tell us what you regard as a "value for money" RIY and then explain how the RIY converts into actual money you pay out.

As shown for instance in these FSA tables of charges:

https://www.fsa.gov.uk/tables

Moneysavers should note from the tables that almost all ISA investments apart from trackers will impose 40% charges on the amount investment over a 10 year period.


So go through a discount IFA, or you pay through the nose. :mad:

dunstonh

The 0.3% extra RIY does not surprise me for a product that contains some degree of guarantee on death. As we have already said, guarantees cost money.

It's not the cheapest product out there but it still beats bank or building societies ISAs.

whiteflag_3

EdInvestor wrote:

This is a reduction in yield of 3.5%.

It is more than three times higher than a normal pension or ISA.

Stockmarket investments are only projected to manage a 7% increase these days.

An you call a 3.5% RIY trivial?

Incredible.

where do you get 3.5%?

2.3% with Fundsnetwork
2.6% with Sterling

Difference 0.3%

Where have said I find 3.5% trivial?

I had hoped this thread might not degenerate and it may be possible to have a sensible debate, yet again you have started making unfounded accusations.

And the whole thing started from you posting an article that is incorrect yet you refuse to make comment on it further.

What a normal pension or ISA? Is a normal pension a stakeholder provided by an insurance company or is it a low cost SIPP. To compare on the same basis I assume you are refering to products that provide payment for advice?

Do you understand how RIYs are calculated. It is not just a reflection of the ongoing AMC (1.5%) in this case, but also the effect of the initial charge and any ongoing expenses.

Thought you would have understood 3+0.5% trail was the commission not the charges.

whiteflag_3

Luckily ED i had Cut and pasted your first response before you completely changed it.

Shame on you :mad:

"Do you understand how RIYs are calculated. It is not just a reflection of the ongoing AMC (1.5%) in this case, but also the effect of the initial charge and any ongoing expenses.

Clearly you dont

dunstonh

Moneysavers should note from the tables that almost all ISA investments apart from trackers will impose 40% charges on the amount investment over a 10 year period.

40% charges over 10 years?

hmm, average AMC is 1.5%. 1.5% x 10 = 15% Even if you add in 3% more for full initial commission, you only get to 18%.

.

EdInvestor

Very confusing figures in your original post WF.

So let's try and clarify this situation by talking about real money, shall we?

The Sterling ISA isn't on the FSA website, but I've found another similar type of "expensive" product that will probably do instead.

This is the AXA Multimanager Balanced Managed ISA, with a choice of 23 funds.

Now if you invest the full 7k annual allowance and keep this ISA over 10 years, according to the table you will pay a total of 3,280 in charges. [That's 47% of your original investment for those interested].

Now perhaps you'd be so kind as to look up the Reduction in Yield listed for this product, and then we can see how a RIY transflates into real money.

TIA, your efforts are appreciated.

dunstonh

Now if you invest the full 7k annual allowance and keep this ISA over 10 years, according to the table you will pay a total of 3,280 in charges. [That's 47% of your original investment for those interested].

AXA do not charge £3280 over 10 years. You are incorrect. That is the effect of charges on the value over 10 years had the charges not been taken and invested at 7% p.a. compound.

Completely different figure to the actual charges. If I didnt pay the 10% profit margin on my Tesco shop every week and then invested that at 7% a year I would probably be a millionaire by now. Have Tescos charged me a million pounds?

Ed, AXA balanced managed is not reflective of a typical IFA product but a tied agent product. It is also not reflective of the Sterling ISA either.

EdInvestor

AXA do not charge £3280 over 10 years. You are incorrect. That is the effect of charges on the value over 10 years had the charges not been taken and invested at 7% p.a. compound.

It amounts to the same thing, doesn't it?

It's the total of the charges themselves, plus what they would have earned for you if the money had been invested on your behalf instead.

This mounts up to a very considerable level over time, particularly with very long term investments like pensions,where what appears to be a low charge of 1% ends up swallowing 25% or more of your fund.