IT's - dividend reinvestment?

Newbie2saving

Another one for the experts....

I am still deciding between adding a few blue chip shares to my 2012 ISA S&S pot, or a few ITs. My S&S Vantage ISA is with HL.

I was wondering, how does IT dividend reinvestment work (is it the same as shares?)? My funds are all accumulation funds, I don't want an income from this investment, purely growth on capital. So can this be done? Do HL charge more than others for holding IT's?

I will ask opinions on the specific IT's I am interested in when I make some more informed choices! I have a short (long) list of 12, but with only 50% of my S&S pot, I want to limit it to 3-4 (either IT's or shares).

Thanks again for any thoughts...

atush

I invest in ITs thru a brokerage acct, and thru in house savings plans.

All my in house savings plans have dividends reinvested, some of my brokerage ones dont. It is very easy to reinvest thru in house plans, but some brokers have rules you have to reinvest ALL dividends rather than pick and choose- so check with HL and get it in place. Certainly is an easy way (if costs are low) to grow your funds if you don't need income.

BLB53

HL are ok for funds but not very competitive on shares and ITs.
For ITs you would be better with iii who only charge 1% of the amount of dividend received for reinvestment, (so eg £20 dividend charge is only 20p) - with HL you have to wait for dividends to accumulate to £50 and then pay the full fee £11.95 to reinvest.
Alternatively go direct to the IT provider.

Newbie2saving

atush wrote: »

I invest in ITs thru a brokerage acct, and thru in house savings plans.

All my in house savings plans have dividends reinvested, some of my brokerage ones dont. It is very easy to reinvest thru in house plans, but some brokers have rules you have to reinvest ALL dividends rather than pick and choose- so check with HL and get it in place. Certainly is an easy way (if costs are low) to grow your funds if you don't need income.

Thanks for the response. I ideally wanted my ITs within my isa as a newish investor I'm not making huge contributions. Sounds ideal to have them reinvested such as a drip for growth. Will call HL tom and in the meantime continue my research. Thanks again.

Newbie2saving

BLB53 wrote: »

HL are ok for funds but not very competitive on shares and ITs.
For ITs you would be better with iii who only charge 1% of the amount of dividend received for reinvestment, (so eg £20 dividend charge is only 20p) - with HL you have to wait for dividends to accumulate to £50 and then pay the full fee £11.95 to reinvest.
Alternatively go direct to the IT provider.

Ouch that sounds expensive!!! Always glad i ask on here first before diving in. I could decide to put these outside of my isa this year, hard to know what to do for the best now. I thought I had finally made my decisions a lump sum into vantage lifestyle, a top up of existing funds and a few ITs. Now with those charges I will have to reconsider. Thanks for the info.

grey_gym_sock

with HL, £50 is the minimum amount before they will reinvest in *funds*, but for *shares* (including investment trusts) the minimum is £200 ... which makes the £11.95 charge slightly less excessive, but you may have to wait a while before anything is reinvested.

HL also charge 0.5% per year, capped at £45, for any shares (or ITs, or ETFs, or corporate bonds) held in an ISA. this charge *doesn't* apply to unwrapped investments (in the "fund & share account").

HL's basic flat charge for share dealing (£11.95) is now fairly competitive, but they're expensive if you want reinvestment of share dividends, or to hold shares in an ISA (unless, perhaps, your portfolio is big enough that £45 per year is an insignificant amount to pay).

atush

Given the huge CGT exemption, and th fact that divendends don't have further tax to pay if you pay BRT- I would look into a investmtnt trust savings plan. Charges are very low compared to HL

mr_fishbulb

BLB53 wrote: »

HL are ok for funds but not very competitive on shares and ITs.
For ITs you would be better with iii who only charge 1% of the amount of dividend received for reinvestment, (so eg £20 dividend charge is only 20p) - with HL you have to wait for dividends to accumulate to £50 and then pay the full fee £11.95 to reinvest.
Alternatively go direct to the IT provider.

something I found with H-L is you can pull out the money from your dividend account, and use it towards a lump-sum purchase.

Newbie2saving

Lots of info, thanks a lot.

grey gym sock - my portfolio isn't large in this case, it is basically 50% of my ISA allowance this year and with wanting to make a number of purchases I can see this eating away into any profit with HL.

atush - I haven't heard of this route, so I will need to research it in a lot more detail. Do all the IT houses offer their own plans? This may then have to sit outside of my ISA and built up as an investment for the future.

mr_fishbulb - good idea! Sounds like a little crafty way round the issue, ideal if the dividends are on a large sum, but on a thousand pounds here and there, the charges would be excessive to reinvest, unless I used that money elsewhere, say into one of my funds?

I am still trawling through my shortlist, down to about 8 now!!!