MSE News: Guest Comment - Should you open a cash or investment Isa?

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"A month into the tax year, savers must make an Isa choice. Dennis Hall, from Yellowtail Financial Planning, explains ..."

Read the full story:
Guest Comment: Should you open a cash or investment Isa?

new

Thanks for the article. I want to know whether the PEP that I started in 1998, with Abbey/Santander, monthly payments of £25 and current total value £7,520 is the best deal for me, or whether I need to look at alternatives [am nearing retirement age, lowish income/pension prospects, so I want to get the best return which is easily accessible]

dunstonh

new wrote: »

Thanks for the article. I want to know whether the PEP that I started in 1998, with Abbey/Santander, monthly payments of £25 and current total value £7,520 is the best deal for me, or whether I need to look at alternatives [am nearing retirement age, lowish income/pension prospects, so I want to get the best return which is easily accessible]

Banks and building societies are typically up there as being the most expensive distribution channels and offering the lowest quality funds.

There is a generalisation in investing (meaning some exceptions apply) that you avoid bank funds when picking your investments as you more or less know without looking that they are going to be below par.

£25 is below the typical minimum nowadays. Most platforms require £50-£100pm. Only a few fund houses direct accept a figure as low as £25 and going direct is not a very cost effective way of doing it (although it may be cheaper or the same as you are doing now).

new

dunstonh wrote: »

Banks and building societies are typically up there as being the most expensive distribution channels and offering the lowest quality funds.

There is a generalisation in investing (meaning some exceptions apply) that you avoid bank funds when picking your investments as you more or less know without looking that they are going to be below par.

£25 is below the typical minimum nowadays. Most platforms require £50-£100pm. Only a few fund houses direct accept a figure as low as £25 and going direct is not a very cost effective way of doing it (although it may be cheaper or the same as you are doing now).

Thanks for prompt reply - if I want a better return, would I be better investing the £7000 in a high rate fixed term isa?

dunstonh

new wrote: »

Thanks for prompt reply - if I want a better return, would I be better investing the £7000 in a high rate fixed term isa?

You cant compare like that as one is savings based the other is investment based. Investment returns are always unknown. The level of volatility depends on the level of risk you take. Savings rates are defined and you know what you are getting.

There will be times when savings beat investments and vice versa. Typically, investments beat savings over the long term but could be worse in short term periods.

jamesd

The S&S ISA has one advantage even for fairly small amounts: you don't need to report all of your sales and purchases to HMRC if you sell more than four times the annual capital gains tax allowance worth. You do have to do that outside an ISA or other tax wrapper. It's easy enough to get over £40,000 of total sales if you change investments regularly during a year.

new, how is the money in your PEP currently invested? Are you comfortable with those investments or do you want to change them, if so, what is your reason for wanting to change?

It's probably possible to get the same investments more cheaply, or better investments at the same or lower price using a fund supermarket like Hargreaves Lansdown. They have a £50 minumum for monthly investments but you can turn that on and off so you could have it off for six months and on for another six.

Baldur

new wrote: »

....if I want a better return, would I be better investing the £7000 in a high rate fixed term isa?

The maximum that you could subscribe to a Cash ISA, whether fixed or variable, in the current tax year is £5340.

ISA transfers from Stocks & Shares ISAs (including former PEPs) to Cash ISAs is not permitted but Cash ISAs can be transferred to S&S ISAs.

John_Pierpoint

The stocks and shares ISA does not have to be invested in shares - you no longer get the tax back on share dividends.

I've bunged a quid or two into M&G (Mean & Greedy) bond funds over the years. You can even get inflation linked ones if you like me think the debt burden can only be defaulted or inflated out of existence.

Performance was somewhat wobbly around Xmas 2008 but the uk - unlike the PIIGS - managed to avoid economic Armageddon and my UK and Euro bonds have bounced back.

Fingers crossed.

Might invest / switch into income shares though if inflation does look like getting worse.