S&S ISA - how to choose provider & fund - and should I transfer existing investment?

Nashbridges

Hello there, I'm totally confused. I have £2900 with Funds Network, investing £250 a month, in their Jupiter Merlin Income Portfolio Accumulation Fund. It's sitting at a very small loss; the charges are 5.25% initial charge, 3% commission and ongoing commission of 0.5%. I don't understand what these add up to - I suspect that many people don't... Every time I choose a S&S ISA, the damned thing loses money.

I've now got £15K to invest from my old Dad's estate. I'm interested in putting £5,100 in a cash ISA (going for Santander's 3.3% deal) so I can get at the money sharpish when the roof falls in. For the rest, I'd like to go for a S&S ISA. I realise I might be too late for the current tax year - but if so I'm quite happy to go for next year.

My questions are:

1. Does anyone have any views on my current fund and the level of charges?
2. Funds Network don't charge for transfers out, so I'm thinking I should probably stick the balance of my current year ISA allowance in there and then transfer it out later, if I decide to change provider & fund. Agreed? I'm conscious of the level of that 5.25% initial charge, which sounds steep... Would I incur the same again when I transfer? Ouch...

3. How the heck do I go about choosing provider and fund... I think that JP Morgan & F&C are both reputable - agreed? But how do I go about choosing which of their funds would be a good bet? I'm not terribly risk-averse but given that it's Dad's money, I don't want to lose too much, it'd be very sad... I could go for a mixture of a tracker fund tracking the UK FTSE and maybe an emerging markets fund for some of it... Does this sound daft? Any ideas?

Many many thanks in advance for any thoughts that might stop me from losing the family silver dabbling in something I don't understand.

Sorry for the many detailed questions above

Di

Box

Nashbridges wrote: »

I realise I might be too late for the current tax year - but if so I'm quite happy to go for next year.

You might have time. My advice would be to put the £5,100 in a cash ISA as soon as possible (i.e. before 5th April), assuming you haven't already used up your cash allowance for 2010-2011.

This would leave you free to put the full remaining £9,900 into a S&S ISA from 6th April.

Nashbridges

I've got the £5100 cash element sorted in terms of the deadline - that'll be in by 5 April (Santander are arranging callbacks to customers at the moment, so there's still time). Sorry I wasn't clear, it's the rest of it that I think I'll struggle with, unless I put it in my current (Funds Network) ISA... But I don't know whether I should do this, if the fund is no good, given the initial 5.25% charge... Especially if I might then incur another initial charge on transfer of the balance in the fund to another provider / fund. (NB Funds Network have confirmed there is no exit charge on withdrawing my money).

Nashbridges

It occurs to me that I can only invest in my current S&S ISA prior to 6 April anyway, since I've put money in it during this tax year. So the question of a new ISA (and possibly transferring existing funds) only arises for the new tax year... But I'm still confused as to whether my current fund is duff, and whether to use up the rest of my ISA allowance by paying into the existing S&S ISA now, and then possibly transferring the funds out of the ISA to my new one during the next tax year? Or alternatively just having 2 S&S ISAs on the go (but contributing to only one of them during any given tax year)....

pressuredrop_2

The fund is available for 0.5%. No need to pay 5.25%.

Rollinghome

Nashbridges wrote: »

My questions are:

1. Does anyone have any views on my current fund and the level of charges?
2. Funds Network don't charge for transfers out, so I'm thinking I should probably stick the balance of my current year ISA allowance in there and then transfer it out later, if I decide to change provider & fund. Agreed? I'm conscious of the level of that 5.25% initial charge, which sounds steep... Would I incur the same again when I transfer? Ouch...

3. How the heck do I go about choosing provider and fund... I think that JP Morgan & F&C are both reputable - agreed? But how do I go about choosing which of their funds would be a good bet? I'm not terribly risk-averse but given that it's Dad's money, I don't want to lose too much, it'd be very sad... I could go for a mixture of a tracker fund tracking the UK FTSE and maybe an emerging markets fund for some of it... Does this sound daft? Any ideas?

Di, that fund has done reasonably well so if you aren't in profit it's likely to be due to charges.

Your best bet might be to contact good old Hargreaves Lansdown www.h-l.co.uk who you'll see referred to a lot in this forum, either by phone or email, and ask them about transferring the ISA to them. You might want to top it up first as the transfer will take you beyond April 5. They make a much reduced initial charge for that fund, just 0.25% (see here), and more often none at all for other funds.

Although that fund has done quite well it does have high total annual charges of about 2.33% due to being a cautious managed "fund of funds" - it invests in other funds so you have double charging. It probably suits your needs quite well but you could find funds that have have similar results with lower costs. A FTSE tracker would have the lowest costs but because you would then be 100% in equities would be more volatile than that fund and perhaps not what you want. You could have a mix of two or three funds within your ISA at no extra cost.

Nashbridges

This is incredibly helpful, thank you. I will certainly get in touch with Hargreaves Lansdown. The annoying thing is that I was directed towards this provider by an IFA a couple of years ago (albeit the advice was free so I knew he'd be remunerated by commission) - so it seems that the maxim "you get what you pay for" applies here. I wonder whether I should go for a FTSE or other tracker fund to avoid the high charges. I'm thinking I'll wait to pay in the money to the S&S ISA via my new provider rather than paying it into Funds Network and losing 5.25%. I know this means the loss of part of my 2010/11 ISA allowance but the 5.25% is just too much to stomach.

Rollinghome

Nashbridges wrote: »

I wonder whether I should go for a FTSE or other tracker fund to avoid the high charges.

If you look at the chart for that fund alongside say the FTSE All share index and tick 'Total Return' to include dividends you'll see how you'd have done in comparison with an index tracker. When equities crashed in 2008 the fund held up well but as you'd expect has done less well since. It includes bond, equity, and gold investments which tends to make it far less volatile than a purely equity investment. The downside is the high charges and probably, but not definitely, a lower return in the long run than you'd get from a pure equity fund. The annual charge for the HSBC tracker is 0.28%. Emerging market funds are very volatile and might be a bit scary for your dad. A global fund with a just a small part invested in emerging markets might suit better.

Funds that combine bonds and equities are slightly less tax efficient in an ISA as the tax on the bond interest generally can't be reclaimed as it could from a separate bond fund.

If you wanted to invest in an F&C Investment Trust savings scheme, which might be what you had in mind and is slightly different to a unit trust, you'd be better dealing directly with F&C rather than H-L. See https://www.theaic.co.uk for more info about investment trusts.

cheerfulcat

Nashbridges wrote: »

I'm thinking I'll wait to pay in the money to the S&S ISA via my new provider rather than paying it into Funds Network and losing 5.25%. I know this means the loss of part of my 2010/11 ISA allowance but the 5.25% is just too much to stomach.

Fidelity have a " cash park " where you can keep cash within the S&S ISA until you decide what to do with it. You could put the rest of this year's allowance in and transfer the lot at your leisure.

Rollinghome

Yep, usually no need to be in too much of a rush to invest at the end of the tax year.

Only twice in the last 10 years has the FTSE failed to fall to a lower level during the year after April 5. Last year for example, 2010, it fell 17% after 5 April by July. This year may or may not be different.