Fund Supermarkets

baron_muffback

Hi

I would be obliged if you could assist me. Have an ISA that I purchased directly from provider last year (2009-2010)- call it fund A.

This year I intend to buy my ISA via a fund supermarket (H & L or iii etc). I intend to split my allowance 50/ 50 investing more in fund A & the rest a new fund B.

Options-

1. Transfer the existing Fund A (2009-10) to a Fund Supermarket, then split 2010-2011 allowance 50/ 50 investing more in fund A & the rest a new fund B via the Fund Supermarket.

2. Leave existing Fund A (2009-10) with the provider. Invest my 2010-2011 allowance 50/ 50 investing more in fund A & the rest a new fund.

What are the pros and cons of each of these approaches? I realise that I might need to pay an exit fee if I shift from provider to the money supermarket. Also realise that its easier to manage investments if they are with one provider. What I am keen to understand is if I go with Option B will I be getting charged twice for managing fund A? Any thoughts would be appreciated.

Regards
The Baron

Mikeyorks

You don't have such options - as you can only invest in one ISA in a tax year. You can't split the allowance 50:50 ....... unless you're splitting between cash and Stocks and Shares ISAs.

Your basic option (although it is a bit dependable on the content) is to transfer Fund A to the supermarket. And then add your allowance to it (or add first and then do the transfer).

If your ISA comprises of Funds you can vary the mix after the transfer. If you want to view it as 'A' and 'B' within the ISA wrapper - that's fine.

Alternatively you leave A where it is and create B with your 10-11 allowance/

psychic_teabag

OP's options sound okay to me. Option 1 is transferring Fund A (which is last year's ISA) to the supermarket, and then with this year's allowance, buying some more of A, and some B, within the same supermarket account.

Option 2 is just buying some of A and B in a fund supermarket using this year's ISA allowance, leaving last year's ISA where it is.

So in both cases, you are buying some A and B in a fund supermarket using this year's ISA allowance. In option 1, you are also transferring some existing units of A to the supermarket. But that's an entirely separate transaction which you can do now or later.

One benefit of option 1 is that, for example, H-L require that you buy at least £1000 of any fund first time, but if you already have some of the fund, it allows a smaller incremental purchase. But if you buy via the regular saving approach, that minimum is reduced anyway.

Option 2 shouldn't cost any more since costs tend to be percentages rather than fixed amounts, but this will depend on which supermarket you choose. eg costs the same to remove 1% from each of two holdings of fund A as to remove 1% from a combined holding of fund A. But if the original provider charges a fixed annual fee, that will obviously be in addition.

Depending on the fund and the supermarket, the transfer might have to be done as cash rather than stock (ie original provider sells the holding, sends the cash to the supermarket, and the supermarket buys back into the fund). So you're out of the market for a while, and you might incur some extra costs in addition to a possible exit fee from the first provider.

Linton

baron_muffback wrote: »

.....What I am keen to understand is if I go with Option B will I be getting charged twice for managing fund A? Any thoughts would be appreciated.

Regards
The Baron

The two fund supermarkets I use (Fiidelity, iii) dont have management charges.

dunstonh

Linton wrote: »

The two fund supermarkets I use (Fiidelity, iii) dont have management charges.

Most bundled platforms dont. Its the unbundled ones that have the charges but then the fund charges are lower (and you often get institutional funds rather than retail).

The whole point of platforms is to allow you to consolidate different investments in one place. So, splitting seems to be a bit pointless IMO.

Mikeyorks

psychic_teabag wrote: »

Option 2 is just buying some of A and B in a fund supermarket using this year's ISA allowance, leaving last year's ISA where it is.

.

If that's what is implied ie having two elements of Fund A in two different places - then you're right. But I didn't (and don't) read it that way.

psychic_teabag

Mikeyorks wrote: »

If that's what is implied ie having two elements of Fund A in two different places - then you're right. But I didn't (and don't) read it that way.

Oh, yes, okay, I see what you mean now. OP cannot buy some more of fund A direct from provider (as last year) and in addition buy some of fund B somewhere else (both within this year's ISA allowance).