ISA charges alert

Paul_Herring

EdInvestor wrote:

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.

You appear to be giving credance to the Tesco arguement made in the same post to which you're replying....

EdInvestor

It's the same kind of thing as compound interest, except you're paying it, not earning it .

dunstonh

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

No it doesnt. If a company is charging £1000. You cannot say that they have charged £3000.

whiteflag_3

EdInvestor wrote:

THis looks like the one here, and indeed it does seem to have this GEB type money back feature - but only if you die (how much would 7k life cover cost for that? :rolleyes: )

Sterling ISA

Perhaps our IFAs would care to give us a Reduction In Yield figure for this ISA, so we can see the effect of the charges for this guarantee on the returns?

While you're at it, I see that the ISA features access to a neat little With-profits lookalike " profits protection" fund. Do you think you could provide an RIY figure for that fund as well?

I note that it offers daily churning in and out of cash and equities. Very interesting to see the effect of that on the charges.

The return of original investment is on death only and all Sterling promise is that if the value of the plan is less than the initial amount invested on death, the initial investment(less any withdrawals)will be paid out. This feature applies to all funds in Sterling investments and gives older investors extra piece of mind.

There is no charge for this, Sterling provide it as a product feature :cool: .

Now combine this with the fully transparent protected profits funds and I think you might be on to a winner for the more cautious older investor.(especially in a bond with no initial charges and maybe even enhanced allocations)

It seems a whole lot better than the GEBs so fondly endorsed by MSE Martin

EdInvestor

The position is this:

You pay X in charges.

But the "effect" of the charges is that you lose X plus Y from your total returns.

How does the investor find out the value of Y, apart from checking the FSA tables, which most certainly don't cover every product out there?

Perhaps Y has the same value as X? It often seems so..

Paul_Herring

You pay X in charges.

But the "effect" of the charges is that you lose X plus Y from your total returns.

How does the investor find out the value of Y, apart from checking the FSA tables, which most certainly don't cover every product out there?

Perhaps Y has the same value as X? It often seems so..

Clarification required for me please (given the above):

X = charges?
X+Y = Reduction in yield?

Some consider the resultant RIY over a long period to be extortionate?

I think I've seen at least one calculation on this thread that seems to compare the monetary value of RIY over a period to the initial investment which to me seems a little silly - should it not be compared with the final value of the investment after the period concerned in the RIY calculation?

dunstonh

I think I've seen at least one calculation on this thread that seems to compare the monetary value of RIY over a period to the initial investment which to me seems a little silly

Yes, comparing it with the original investment is silly.

Indeed, I find the effect of deductions over time information to be a complete waste of time. The reduction in yield information is far more suitable and accurate to real world situations. I am more interested in knowing if I make 10%, then it is 1.5% that is being deducted. I am not interested in knowing that if that 1.5% hadnt been taken and then it had grown at 7%, the diffference would have been xyz amount. That information is not necessary and unless you are a communist, there is no reason to know it.

As I said, for it to matter, you would have to apply the same principle to everything in life. If I didnt pay the milkman his exta 2p on the pint of milk and then invested that for 20 years at 7%...... blah blah.

The concept is daft. What is unfortunate is that some seem to mix up actual charges with effect of charges and assume effect of charges is the same thing.

whiteflag_3

dunstonh wrote:

Yes, comparing it with the original investment is silly.


As I said, for it to matter, you would have to apply the same principle to everything in life. If I didnt pay the milkman his exta 2p on the pint of milk and then invested that for 20 years at 7%...... blah blah.

or you could get your own low cost cow and milk it yourself...............

EdInvestor

The concept is daft. What is unfortunate is that some seem to mix up actual charges with effect of charges and assume effect of charges is the same thing.

Let's see if we can get an example.

If you put 100 quid a month into a cash ISA for 5 years @4% interest p.a, you would get 6,640 at the end.

If you put 100 quid into a stockmarket ISA for 5 years with a 1.5% AMC and it grew @4% p.a. what would you get at the end of the 5 years?

whiteflag_3

The charges are the opportunity cost for the expected out performance.

What you are trying to argue is a bit like saying a pushbike is cheaper to run than a motorcycle therefore the bike is the superior mode of transport.