Stocks and shares ISA - keep or close?

LittleMissAspie

A few years ago my boyfriend opened a stocks and shares ISA. It was my idea really. He didn't have any savings accounts at the time, so I got him to open a cash ISA. But he has more spare money than a cash ISA allows so I got him to open a stocks and shares ISA too. I thought it would be better than a normal savings account to avoid tax.

He was never very happy with the s+s ISA. The advisor we saw to set it up didn't explain how it worked. Boyfriend said he wanted any interest to go back into the account, but he keeps getting cheques, a couple of quid here, a couple of quid there. We don't understand what the cheques are for. We don't understand what the components on his statement are, we have no idea how the whole thing works. To top it all they got his surname backwards. So he refuses to go back and speak to the advisor, because he thinks he's useless.

He stopped paying into the s+s ISA a while back, and opened a normal savings account alongside his cash ISA. We assumed he would have lost money on the s+s ISA so the plan was to leave it until the economy picked up and close it when he broke even.

Note: We do realise that an s+s ISA is a long-term investment and he doesn't need the money in it for a long while yet. He may need some of it in 18 months but the rest could stay there forever, in theory. The reason he wants to get rid of it is not the loss of money/interest, but because he wants a simple savings system that he understands, and he doesn't understand the s+s ISA.

But he's just received a statement today that shows he has more than he thought. He hasn't worked out yet his total payments in, but it looks like he may actually have made a small profit.

So, and this is probably greed speaking bearing in mind my note above, if he hasn't lost anything and the economy is at a low point, maybe it is worth keeping the account open? Not sure now, so any opinions would be useful.

Lokolo

We can't tell you what to do, if your boyfriend is still worried about it, withdraw the investment now. If he doesn't like the risk then he shouldn't go for it. I assume you went to a bank for this, so you might want to read the T&Cs because there could be an early withdrawal fee clause.

If he is happy to see the little profit then keep it and see what happens.

Also on your statement there should be the investments, you could write them out here and get more of an overall idea of whats actually invested.

Lansdowne

It might help to tell us what the actual funds are (there may be just one, or several).
On the statement it should say so-many units, or shares, of XXX, total value = £yyy.

The XXX is the name of the fund, might end in (Acc) or (Inc).

Depending on the type of investment, the adviser that he is not happy with may still be receiving ¼% in commission twice a year for selling to him. What I did, being happy with the product but not the adviser, was keep the fund but transfer it to a discount provider who passes on some of the commission.

dunstonh

He stopped paying into the s+s ISA a while back, and opened a normal savings account alongside his cash ISA. We assumed he would have lost money on the s+s ISA so the plan was to leave it until the economy picked up and close it when he broke even.

That was the wrong thing to do. The monthly payments had they continued would have bought units at the lowest prices and would now be worth 20% more than the purchase price. You dont wait until they are more expensive to buy. You buy when they are cheap.

Note: We do realise that an s+s ISA is a long-term investment and he doesn't need the money in it for a long while yet. He may need some of it in 18 months but the rest could stay there forever, in theory. The reason he wants to get rid of it is not the loss of money/interest, but because he wants a simple savings system that he understands, and he doesn't understand the s+s ISA.

However, 18 months is not enough time for investing. Monthly contributions need at least 10 years really.

One thing you haven't mentioned, and its the most important, is the investment. You have told us the tax wrapper but we dont know how or where its invested. I have made an assumption its equity based but it may not be. So, no-one can really tell you what is best without knowing what you have. Its a bit like saying you dont like a drink and when we ask you what drink it is you tell us all the details about the cup but not the drink.

LittleMissAspie

dunstonh wrote: »

That was the wrong thing to do. The monthly payments had they continued would have bought units at the lowest prices and would now be worth 20% more than the purchase price. You dont wait until they are more expensive to buy. You buy when they are cheap.

Probably, but he was fed up of putting so much money into something he doesn't understand a word of.

His statement looks like this:
http://www.ifihada.com/~clare/pic/Dscf0263.jpg

We don't know what the different pots mean or what overflow means. He didn't even know he had something called Platinum Plus, because when he rang a few weeks ago to get his balance they only told him about the unit trusts.

I can't find any mention of commission in the leaflets that came with the statement, but it says there's a cash-in charge for the Platinum Plus. It's got a whole page explaining MVRs but I can't make head nor tail of it. I don't remember the advisor saying anything about fees or charges.

One of the leaflets says the Platinum Plus asset mix is 29% bonds, 22% UK shares, 23% property, 16% overseas shares, 9% alternative investments, 1% cash. Don't know about the unit trusts but I think it's mostly shares.

It's not the risk that is the problem, it's that we don't understand what is happening to his money, what all the terms mean, why he's been getting cheques etc. If we understood it all then he could make an informed decision. I didn't realise it was so complicated, if I had I wouldn't have got him to open it

Lokolo

Ok.

Unit Trusts. These are a collection of different investments (usually shares but I will come onto that later), all put together in one heading. You have 2 of these. Usually they have a certain target, so your first one is CIS UK Income with Growth.

The UK Income bit means it primarily invests in UK companies be it shares or bonds*.
The fact sheet for the fund shows that it invests 75% in equities (shares), 20% fixed income (bonds) and a couple of % in cash and other.

*Bonds are loans to companies which will pay an interest amount at the end of the term. So a Vodafone 2012 4% Bond will pay 4% at the end of the term (this is very simplistic, there is more involved). But Vodafone could go into admin and then not pay off the loan, so you lose your money you put in. This is less likely to happen, so are less risky than equities.

The other fund is a Bond fund, which I have explained above what Bonds are.

Bonds have done ok over the past yearish, I haven't looked at your funds specifically though so cannot say for certain.

Hope that helps a bit.

margaretclare

You and your boy-friend should really do a bit of reading and finding out. None of us was born with a knowledge of investing - most of us, even the experts, have had to learn!! It's hardly rocket-science and need not be left to 'advisers'.

That said, what he should do now is to look at the S&S ISA provider and switch to funds which 'accumulate'. That means, instead of getting a cheque for a few quid - it's called dividends - the profits, or dividends, are re-invested i.e. by buying more units. That way his funds will grow over time.

As an example, I transferred 2 cash ISAs into S&S ISAs at the end of March, that way I used my allowance for the last tax year and the present one. I have £7,200 in 4 different funds, and so far they have made me £245.55 in 2 1/2 months. I am leaving them strictly alone - wouldn't dream of cashing them in unless for some absolutely dire emergency.

Lansdowne

Platinum Plus seems to be a 'with profits plan' described in this PDF, and it is not accepting new money.

Both the CIS funds are 'Income' funds and the income is derived from interest in the case of the corporate bonds, or dividends earned by the shares in the other fund.

The cheques you have been getting could be from one or all of these If you asked for all the income to be reinvested, that doesn't seem to be happening.

dunstonh

It's not the risk that is the problem, it's that we don't understand what is happening to his money, what all the terms mean, why he's been getting cheques etc. If we understood it all then he could make an informed decision. I didn't realise it was so complicated, if I had I wouldn't have got him to open it

Its not difficult but you either have to have the time to research it yourself or use your adviser to give you the basics in simple language and leave the rest to them. In this case, it appears that you havent used an IFA but a tied sales rep of the co-op. Its never a good idea to see a sales rep (products more expensive, limited choice and sales targets and pressure to see 3-5 people a day can mean they aim to get in and out quickly and dont spend the time with you that you need).

The concept is good but you do need to understand it. Otherwise you make decisions which may or may not be right (pot luck).

LittleMissAspie

I did a lot of reading about whether a s+s ISA was a good idea or not, but the stuff in his statements doesn't seem to relate to the stuff I read about. I am reasonably intelligent and really good organising our money but I can't follow a lot of the wording in the terms and conditions. It doesn't explain what things mean. Like what overflow is, or the difference between single premium investment and regular premium investment. I assume by investment they mean payment to the account. But you can make more than a single payment without it being a regular payment. Not that it's relevant here because my boyfriend always made regular monthly payments, but it's an example.

He definitely asked for any interest or income to be kept in the account and not paid out to him, I was there when he said it.

On the statement it has cash-in values for his Platinum Plus part, will this include or exclude the MVR he has to pay? The MVR is 20-25% for the years he was paying in, so will this ever expire like the cash-in charge does?
http://www.co-operativeinvestments.co.uk/cfscombi/pdf/MKT539A_WEB_Platinum_Plus_flier.pdf

LittleMissAspie

The Co-op ones are independent:
http://www.cfsifa.co.uk/servlet/Satellite?cid=1195554489128&pagename=CBFAr%2FPage%2FtplCBFArStandard

That's why we went to the Co-op.