Maxed out ISA, but still want to invest...

Loughton_Monkey

I can tend to be a bit 'blunt' but without intention to offend. We can only react to what is actually written in the post, without knowledge of other holdings, intentions, tax status, or investment requirements.

The thrust of my comments still stand, I think. My observations remain as:

1. Whilst I agree 'investment' in funds (whether in pension, ISA, or elswhere) should be 'long term', I am less uncertain as to (what I perceived to be the strategy here) investing in a fund with a very 'specific' focus for the 'long' term. My main point is that many people invest (say in a pension) and tend to put it in some wide 'managed fund' with quite a broad focus - and simply leave it there to enjoy long term growth. Very legitimate. Nothing wrong with that. An alternative and equally valid strategy can be to put together your own portfolio, consisting of a mix of 'specific' funds. But I am suggesting that the latter strategy probably requires some regular analysis and possible changes in 'where you want to be'. Hence there are dangers on putting together (manually) a mix of funds that make sense today and then leaving them there long term.

2. Another point is that to me, long term investing (in whatever funds) tends to imply pension rather than ISA. This is simply because tax treatment is more favourable (provided you take the lump sum, and especially for higher rate tax payers). These days, growth in ISA or Pension can be identical. But the latter contains tax advantages. The latter also involves inflexibilities in drawing out the fruits of the investment. But long term investment is typically for retirement, and in retirement, it is usual to percieve capital as useful to draw income to spend over the retirement period. This is consistent, again, with the pension route. [In practice, I prefer to be in retirement with both a healthy pension income, and a reasonable sum in ISA's/Cash]

Incidentally, there tend not to be any 'exit charges' these days. Theoretically there are 'entry charges' in the form of the up front 5% charge. But this is fully rebated by many platforms these days. Hence we all enjoy the luxury of being able to switch funds freely, at will, these days.

DonC

Linton wrote: »

ISTM that to invest possibly £1000s in a high risk fund with no track record because you save 3% initial charge seems bizarre. You could easily lose or gain 3% in a week or less. One Lat Am fund I looked at has dropped 10% since the new year.

Your investment choices are up to you but I would strongly suggest to any newbies reading the thread that they focus on putting together a broadly based portfolio before they consider this type of fund.

One of the reasons I was interested in this fund was that it was focussed on Latin America (mostly Brazil to start ), the majority of my current shares \ funds are focussed on the UK, I was looking to diversify a bit.

Linton wrote: »

As to whether to ISA it - I suggest you wait until April. I dont believe you can move funds into an ISA, you would need to sell outside the ISA and buy inside. The costs of doing that could exceed any gain by going for special offers.

I will probably be doing that, thanks.

DonC

Loughton_Monkey wrote: »

I can tend to be a bit 'blunt' but without intention to offend. We can only react to what is actually written in the post, without knowledge of other holdings, intentions, tax status, or investment requirements.

The thrust of my comments still stand, I think. My observations remain as:

1. Whilst I agree 'investment' in funds (whether in pension, ISA, or elswhere) should be 'long term', I am less uncertain as to (what I perceived to be the strategy here) investing in a fund with a very 'specific' focus for the 'long' term. My main point is that many people invest (say in a pension) and tend to put it in some wide 'managed fund' with quite a broad focus - and simply leave it there to enjoy long term growth. Very legitimate. Nothing wrong with that. An alternative and equally valid strategy can be to put together your own portfolio, consisting of a mix of 'specific' funds. But I am suggesting that the latter strategy probably requires some regular analysis and possible changes in 'where you want to be'. Hence there are dangers on putting together (manually) a mix of funds that make sense today and then leaving them there long term.

2. Another point is that to me, long term investing (in whatever funds) tends to imply pension rather than ISA. This is simply because tax treatment is more favourable (provided you take the lump sum, and especially for higher rate tax payers). These days, growth in ISA or Pension can be identical. But the latter contains tax advantages. The latter also involves inflexibilities in drawing out the fruits of the investment. But long term investment is typically for retirement, and in retirement, it is usual to percieve capital as useful to draw income to spend over the retirement period. This is consistent, again, with the pension route. [In practice, I prefer to be in retirement with both a healthy pension income, and a reasonable sum in ISA's/Cash]

Incidentally, there tend not to be any 'exit charges' these days. Theoretically there are 'entry charges' in the form of the up front 5% charge. But this is fully rebated by many platforms these days. Hence we all enjoy the luxury of being able to switch funds freely, at will, these days.

Loughton_Monkey wrote: »

I can tend to be a bit 'blunt' but without intention to offend. We can only react to what is actually written in the post, without knowledge of other holdings, intentions, tax status, or investment requirements.

The thrust of my comments still stand, I think. My observations remain as:

1. Whilst I agree 'investment' in funds (whether in pension, ISA, or elswhere) should be 'long term', I am less uncertain as to (what I perceived to be the strategy here) investing in a fund with a very 'specific' focus for the 'long' term. My main point is that many people invest (say in a pension) and tend to put it in some wide 'managed fund' with quite a broad focus - and simply leave it there to enjoy long term growth. Very legitimate. Nothing wrong with that. An alternative and equally valid strategy can be to put together your own portfolio, consisting of a mix of 'specific' funds. But I am suggesting that the latter strategy probably requires some regular analysis and possible changes in 'where you want to be'. Hence there are dangers on putting together (manually) a mix of funds that make sense today and then leaving them there long term.

Thats a good point.
For the most part I've stuck with Index Trackers in my ISA. I've bought into the stories that they're better than Managed funds as they dont have managers taking a percentage.
I dont know to much about investing though, and dont think Id be able to do any reliable analysis for a while, so I should probably consider managed funds again.

Loughton_Monkey wrote: »

2. Another point is that to me, long term investing (in whatever funds) tends to imply pension rather than ISA. This is simply because tax treatment is more favourable (provided you take the lump sum, and especially for higher rate tax payers). These days, growth in ISA or Pension can be identical. But the latter contains tax advantages. The latter also involves inflexibilities in drawing out the fruits of the investment. But long term investment is typically for retirement, and in retirement, it is usual to percieve capital as useful to draw income to spend over the retirement period. This is consistent, again, with the pension route. [In practice, I prefer to be in retirement with both a healthy pension income, and a reasonable sum in ISA's/Cash]

I wouldnt mind putting something away in pensions.
The only reasons I havent so far is that ISA's seemed simpler and I dont think I'd consistently use my full ISA allowance.
ISA's allow easier access to funds, should I ever require them.
I cant make regular payments to a pension as my income can be a bit erratic.

Loughton_Monkey wrote: »

Incidentally, there tend not to be any 'exit charges' these days. Theoretically there are 'entry charges' in the form of the up front 5% charge. But this is fully rebated by many platforms these days. Hence we all enjoy the luxury of being able to switch funds freely, at will, these days.

[/QUOTE]

True, I just need to get the knowledge together to figure out which are decent funds or not.

Thanks for taking the time to clarify.

Loughton_Monkey

C_Mababejive wrote: »

Dont want to be seen as hijacking the discussion as my query is similar and rather than start a new one,it might be of value to keep it all here.

Now then,i keep reading about SIPPS to the point where i almost feel i should give it some consideration!

If someone has a good FSPS,would a SIPP be likely to add much value?


Could you ,for eg;

Hold just cash in the SIPP in order to get the tax free advantages and also HM governments contribution?

Could you convert a HL fund ISA into a SIPP?

I note that SIPP rules allow you to take 25% of the value as a lump sum and the rest as taxable income....

What happens if you die before all your pot is used up ?

Why is the income taxable?

Ta

A lot of questions! It would probably help to rephrase them a bit.

1. If you have a good FSPS, then that's wonderful. You should ask is it worth investing extra for retirement [forget where you invest it for the momet!]. It's up to you, but generally speaking you should invest (and save) more. Even if you have the 'best' FS scheme, and will get your full 40 years (2/3rds) then remember it gives you either no cash and 2/3rds of the income you are used to. Or if you take the lump sum, your pension income tends to reduce to around half your salary.

2. For all intents and purposes, you should consider investing in ISA and Pension as identical (but..... see below). In other words, you name the funds and throw £500 a month into them under an ISA. I will then throw the same £500 into the same funds, only in a pension. At age 65, you will have a cash value of (say) £50K. My pension pot will contain a value of precisely £62.5K simply because HMRC has shoved in £20 for every £80 I put in. But unlike your cash, I will pay 20% tax on my pension and so HMRC will eventually claw back all their own contributions, plus the investment growth. So basically it's neutral. BUT as long as I take the 25% Tax Free Lump Sum, I get to keep some of the HMRC contribution. Hence I am 'ahead'. But I am paying for this 'profit' in terms of much reduced flexibility. You can spend all your cash when you please. I get mine as a regular income.


3. So for those with a Final Salary scheme, you have options. If your Fianl Salary Scheme will deliver (including your State Pension) £20K a year or more, there is a new law that allows 'Flexible Drawdown'. This need careful research and study, and there are investment risks with it. But to simplify it, you can consider it as a way to invest - similar to ISA, but with the added advantage of tax relief. But unlike 'normal' pensions, you can (under Flexible Drawdown) get hold of the money as quickly as you like after 'crystallisation'. The only 'issue' is that it is taxable, and so it is always in danger of taking you into higher tax. But you could elect to put this additional pension into flexible drawdown, and draw it at a rate which tops up your other income right up to the higher rate limit. Same next year - until the fund is depleted. So this form of pension becomes more similar to an ISA, but with tax relief. And ulike taking a pension as an annuity, this 'drawdown' arrangement means that the full fund is available on death for your spouse to take over and use for her own pension.