Stocks and Shares ISA and upfront charges

rd6821

Hello,

I recently opened a Stocks and Shares ISA, invested £5100 and was charged a percentage fee upfront. This means that the initial fund value was less than £5100. I plan to get another S&S ISA before the end of the tax year. My question is...can I invest more than £5100 to make up the difference? Or is my first S&S ISA classed as being £5100 because that's how much I sent them?

Rich1976

rd6821 wrote: »

Hello,

I recently opened a Stocks and Shares ISA, invested £5100 and was charged a percentage fee upfront. This means that the initial fund value was less than £5100. I plan to get another S&S ISA before the end of the tax year. My question is...can I invest more than £5100 to make up the difference? Or is my first S&S ISA classed as being £5100 because that's how much I sent them?

Investment providers do take an initial charge from your investment. Depending on who you're with can be anything up to about 5.5%. If you're with Hargreaves Lansdown then there is only usually a minimal charge if anything as they normally discount it.

You cannot take out another S+S ISA this tax year but you can transfer it to another provider. Assuming you haven't paid into a Cash ISA this tax year, you can still pay in a further £5100 - however it must be into your exisiting S+S ISA and again you will find they take another initial charge.

jamesd

rd6821, assuming you opened and paid the £5100 into the S&S ISA this tax year you'd either have to add more to the existing one, perhaps using different investments, or you could transfer it to another S&S ISA provider and add more that way, with little or no initial commission. Hargreaves Lansdown is the most popular fund supermarket for this. I suggest that you give them a call and discuss what you're after, you'll find them to be friendly and helpful.

The annual limit is £10,200 of which up to £5,100 can be in a cash ISA but you don't have to use any of the cash part, you can use nothing, £1,000 cash or anything else up to £5,100 cash so long as the total for both cash and S&S doesn't exceed £10,200.

Another rule is that once you've paid into a cash or S&S ISA any additional contributions of that type must be to the same provider, or you can transfer all contributions from this year to another one and then add money to the other one. Only one of each type is allowed to have money from the current tax year.

No restrictions for money from past tax years, you can split that among 100 different ISAs if you feel like it.

stan707

jamesd, I would like to add £1k to an existing cash isa to take the total into the next interest band. I also plan to use open an account with HL for a s&s isa. Can I do that without moving the cash isa to HL in the same tax year?
Thanks
stan707

C_Mababejive

You should have used a fund wholesaler such as Hargreaves Landsdowne,TD Waterhouse and others who would discount most if not all of the initial entry fee.

jamesd

stan707, you can have one cash ISA and one S&S ISA with money paid in during the current tax year, so no need to move the cash ISA money to HL. Just need to ensure that the total paid in to the cash one doesn't go over £5100 and the total paid in to both doesn't go over £10,200 in this tax year.

teddy_ruckspin

Hi Jamesd, re: H-L charges

Could you explain how they work? For instance, I have a H-L S&S isa holding 5 seperate UT's. I understand each UT will have it's individual charges but i'm not clear on how they tie up with H-L charges - i'm a bit confused :-/

jamesd

Assuming the usual case that the UTs are paying commission to HL it would work something like this:

1. Fund charges you 1.5% annual charge. This is deducted from the investment income or growth it produces so you never see an explicit charge for this.
2. Fund pays HL 0.5% IFA trail commission and 0.1% platform commission out of that 1.5% it's taking from your investment.
3. HL rebates 0.25% to you as the loyalty bonus in the ISA, not if it's in the SIPP.

For a small number of funds that don't pay much if any commission, for shares and for ETFs, HL makes an explicit 0.5% charge, up to £200 per year maximum, that is deducted from the loyalty bonus account first, then as a charge to you if that's not sufficient to cover it all. For funds this is shown by a 1, 2,3 or whatever footnote reference in th fund summary, next to the AMC area.

teddy_ruckspin

thanks for the response jamesd, appreciated. Just one more question;

I've heard about some sort of charging rule change happenning in 2012, assuming i'm not talking jibberish and you've also heard this - do you know whether this impacts upon the charging method you explained above?

Thanks again!

jamesd

Yes, it may affect it in some way but perhaps only in disclosure of the various types of charge rather than the final cost to us.