Mortgage payment vs Cash ISA vs Virgin Climate ISA

blizeH

Hi all,

I'm currently debating where to put any money I can tuck away each month, and have narrowed it down to three options:

C&G Variable rate mortgage (2.5%)
I currently pay just 2.5% interest on my mortgage, so have held off overpaying whilst other investments are available to me. I figure whilst it'd be a great feeling to be mortgage free (and seeing my balance drop is quite addictive!) it could be counter productive to invest in this.

Virgin 3.3% 1 year fixed rate Cash ISA (3.3%)
A great interest rate, and the money is only locked away for a year, I'm trying to ensure I don't place everything into this ISA, but may try to put this year's allowance into this account.

Virgin Climate Change ISA
I also figured I may as well try to use my stocks and shares allowance, and having looked into the various accounts available, I'd probably trust Virgin above most other companies, and more importantly this could offer a decent return in a sector I'm keen to back.

I'm thinking I should try to max out my Cash ISA allowance if possible, then any excess could go into the Virgin Climate Change ISA? If I'm incredibly fortunate to have any excess I will then pay it off the mortgage, as allowing for tax I'll struggle to get 2.5% net interest, and figure there's a good chance my mortgage interest rate could increase too.

Would welcome any tips and advice regarding these investments, thank you!

Lokolo

First thing that appeared when I googled the Virgin Climate Change ISA...

http://www.guardian.co.uk/environment/blog/2009/oct/15/greenwash-virgin-money-climate-change-isa

It is also expensive with a 1.75% annual charge.

grey_gym_sock

... and a TER of 3.53% ... that's more of a !!!!!! than a TER.

virgin funds are not good value. they also have a tracker charging 1%, which is at least 3 times the competition.

dunstonh

virgin funds are not good value. they also have a tracker charging 1%, which is at least 3 times the competition.

And their stakeholder pension is about the worst going in terms of cost and features.

The climate change fund is actually quite high risk and IIRC and has a heavy European bias. Since launch it has massively underperformed (-28.07% compared to -8.71% for sector).

I have the TER showing as 2.46% but that is still very high for what is effectively a single sector fund (where 1.xx% is more typical for TER).

grey_gym_sock

i got the figure of 3.53% from HL's site: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/virgin-climate-change-accumulation

JimmyTheWig

blizeH wrote: »

I'm thinking I should try to max out my Cash ISA allowance if possible, then any excess could go into the Virgin Climate Change ISA? If I'm incredibly fortunate to have any excess I will then pay it off the mortgage, as allowing for tax I'll struggle to get 2.5% net interest, and figure there's a good chance my mortgage interest rate could increase too.

Sounds like a reasonable plan.
Others have commented on the choice of S&S ISA. I don't know anything about it, but the people who commented tend to know what they're talking about.
So you might decide to go with your suggestion but with a different S&S ISA. A FTSE all-share tracker, maybe?

I'm assuming that you have an emergency fund tucked away somewhere. Something that you can use if your boiler breaks down or for unexpected car repairs? If not, this would be worthwhile before you look at fixed-term savings or stock market investments.
Stocks and shares are only worth it if you are prepared to invest for the long term. You may well end up with less that you have put in this time next year. If you're happy to leave the money there for 5-10 years or more then that's probably your best bet (if you get a decent fund).

blizeH

Huge thanks for the replies guys, Jimmy for great advice and everyone else for warning me away from that particular account!

I'm thinking I'll stick to my original plan and get the Cash ISA to it's limit as soon as possible, but then try to distribute money evenly between my mortgage and a potential S&S ISA account.

Definitely need to avoid the Climate Change ISA by the looks of it then, shame as I've been meaning to get an S&S ISA for years now, and was quite enticed by the fact that one actually claimed that it'd have a positive impact on the environment, climate change etc

blizeH

As an alternative to an S&S ISA, would it be an option for me to put money into things like FundingCircle, RateSetter, Zopa etc? Or is that a bad idea? Hm.