OEIC's VS Share ISA's

marneyr

Hi Everyone,

This is my first post so i hope this is in the suitable fashion. i'm looking at shifting some cash in an ISA to a better account, and then making regular monthly payments of £50 per month. But is there that much difference to me shifting to an ISA or an OEIC? i've just been to discuss with Lloyds, but i have come out more confused that when i went in, with the financial advisor stating that both were as good as each other. any help toward the pros and cons of these would be greatly appreciated.


thanks,


Robert.

dunstonh

The OEIC is the actual investment. The ISA is just the tax wrapper.

Think of an ISA as a container. you can put various things into that container to make them tax free. Shares, Unit Trusts/OEICs, investment trusts etc. So, an OEIC outside of an ISA is potentially subject to tax (CGT and Income tax) but put the OEIC in the ISA and it becomes tax free personally.

i've just been to discuss with Lloyds, but i have come out more confused that when i went in, with the financial advisor stating that both were as good as each other.

Using a sales rep at Lloyds is never a good place to get advice. Expensive and limited product range and advice and sales shouldnt really be mixed. Plus, the Lloyds remit does not allow portfolio planning (although that isnt a problem really with £50pm) and its documented that you chose the investment. Not that it is recommended to you.

But is there that much difference to me shifting to an ISA or an OEIC?

an unwrapped OEIC will mean you have to keep a record of the purchases and sales to make sure capital gains tax isnt an issue (or when you want to use your CGT allowance (not a big issue in the short term if £50pm is all you are doing). If you are higher rate taxpayer you will be subject to higher rate tax on the income. If you are aged over 65, the income goes towards your age allowance and if above a certain amount can see your age allowance reduced.

By wrapping the OEIC in an ISA, which doenst cost you anything, you avoid the above things. Also, certain investments in an ISA can claim back tax that has been paid (fixed interest securities for example). So, if you were using a fund that contained fixed interest securities then you certainly better off using the ISA.

So, there is absolutely no reason why you shouldnt purchase within an ISA.

ozzage

Just wrt Lloyds. Before I got started on doing this DIY I saw a Lloyds advisor, who then sent me to a different guy - a Lloyds IFA (yes, IFA) They seem to genuinely be an IFA and gave me pension advice with a SL pension investing into three funds which are either Standard Life or other normal funds which I might have picked myself (from Jupiter and M&G)

Is it not possible that these companies DO employ IFAs who can give unbiased advice?