We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
We're aware that dates on the Forum are not currently showing correctly. Please bear with us while we get this fixed, and see Site feedback for updates.
Non-cash ISA's

Legacy_user
Posts: 0 Newbie
I have my mini cash ISA full and intend to add another £3000 in 05/06. My question relates to the stocks and shares mini ISA I also have for my mortgage. When I was in the Abbey the other day the advisor said that I could have a "bond" Isa instead of the stocks and shares as they might perform better. She did say that last year they made 7%. Now I have never heard of this type of ISA and may have picked her up totally wrong but I wonder if anyone could shed some light on this and advise me as to whether this is too risky an option.
0
Comments
-
Be extremely wary of this.
The abbey advisor is using past performance to suggest future returns and that is a big no no.
Corporate bonds, gilts and other fixed interest securities can be held in an ISA. They are lower risk than stockmarket based funds. They also offer lower potential.
Now, a good portfolio should include some of these. However, I doubt your abbey advisor is qualified enough to understand investment porfolios. Especially as a tied agent, she isn't allowed to recommend specific funds. If she does, she is acting outside of her licence.
What you need to be aware of is that with an ISA linked to a mortgage, it will have a target growth rate. This can usually be around 4% to 8% per annum. If you solely invest in corporate bonds, you should consider 4% as an average after charges. If your ISA has been set up with a target growth rate of 7%, then this will leave you 3% a year short and give you a shortfall at the end. Stockmarket funds offer greater potential (and loss) but have a better chance of achieving 7% p.a. than corporate bonds.
I assume that the tied agent is referring to the Abbey High Income Fund. The fund has very little history as it was launched in Oct 2002. Funds do often tend to do well in the first year of launch when issued by banks. Mainly as their sales staff stick money into them as their employer tells them they are going to be good. The sector tends to float between 4% and 10% (with the top performing funds). It would be foolish to consider an Abbey fund being a long term top performer and if you wanted a best guess average return on that fund, I would expect it to average 4-5% after charges.
So, in summary, you could consider it as part of your portfolio. Perhaps "banking" some gains in a safer fund. You could consider adjusting your contribution to have some go into corporate bonds but you should verify the target growth rate of your ISA first.
Your abbey tied advisor cannot advise you on switching funds as it is outside of their licence. They can only take your instructions. She would be able to obtain the target growth rate on your ISA if you dont already know it (it should be quoted on the suitability report done at point of sale or the illustration provided). If you do decide to move down the risk profile into corporate bonds, you may need to increase the contribution to protect yourself from a potential shortfall. My guess is that is what Abbey are hoping as they only earn when you increase the premium.
An alternative option to consider is buying your funds through a discount IFA to avoid that initial charge which Abbey are taking on every contribution you make. You would also have a far greater investment choice covering a range of different investment areas. Plus independents can discuss funds and make fund recommendations where tied agents cannot.
--oops, this post got longer than i intended.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thanks for the reply. As I said before I don't understand these type of Isa's and after reading your reply I think I'll leave doing anything until I talk to our financial advisor who has been very good for us in the past.m We are due to remortgage within the next couple of months and I'll let him review our current share Isa's when we are renegotiating.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 348.3K Banking & Borrowing
- 252.1K Reduce Debt & Boost Income
- 452.4K Spending & Discounts
- 240.9K Work, Benefits & Business
- 617.2K Mortgages, Homes & Bills
- 175.7K Life & Family
- 254.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 15.1K Coronavirus Support Boards