Do ISA's deserve to be slated?

lisyloo

Personally I think I would rather take your 6% net than be involved in property

My property is my home and I'm not intending on moving.
At the moment I'm not overpaying because I have a fixed rate of 4.64% and can get more than that elsewhere.
I have to be "involved" in property to a degree because I need to live somewhere.
I'm not interested in "selling to rent" partly because I think it's too risky but also because I have a lovely home that isn't easy to replace.
I recognise that we are in a bubble but renting long term does not make sense . With buying I expect to be paying a mortgage for 10 years and then have 30 years rent free. Renting long term does not stack up compared with that although I agree it's not a good idea to invest at the top of a bubble (I haven't done that).

Given the amounts involved in the pension as well you should really be looking for annual reviews

Our advisors are pretty good at work and these are reviewed at least annually.
We are however not completely at liberty with these because we are usually forced (for all intents and purposes) to go through the employers scheme and stick with the funds they have although of course there is a choice.
It usually does not make sense to forgoe the employer contributions (over £2K in my case) and due to charges it usually makes sense to stick with the funds they offer (other providers funds are sometimes offered but the charges can be prohibitive).
I also have a few old pensions that I cannot transfer due to high penalty charges.
These are regularly reviewed but in some cases there is little choice (for example NPI were taken over by AMP and have a very high MVA if I transfer).
I don't particuarly like the way we are forced to use certain companies but for me and my husband we would be talking about forgoeing £6K worth of contributions, so given that they are mainstream providers then I don't think it's sensible to turn it down. Therefore it must be recognised that we are restricted to certain providers and certain funds (although certainly there is choice).

You could probably get that for 0.5% a year from an NMA IFA

No, I'm not free to choose the IFA with my companies pension scheme. The companies dictate the pension fund and the IFA.
We can turn it down but we would have to forgoe £6K per year. This is standard in my industry.
My advisor (foster denovo) happens to be pretty good and visits regularly.
They have various software packages and they have shown me what % of income I can expect to recieve and they also produce graphs of the performance of the funds.
Fairly standard stuff I'm sure but it's helps to make the comparison when reviewing fund selection.
My company pension scheme is with Scottish Equitable who seem to have decent performance and a good choice of funds. I think my husbands is with Prudential but again we have no choice over this.

Judwin

StevieJ wrote: »

Personally I think I would rather take your 6% net than be involved in property (in a bubble) or Judwins most safe other bonds (don't perform well against rising interest rates).

Fair enough, but the cash/SS ISA decision is not an either-or. You can have a £3000 Cash ISA and a £4000 SS Isa every year. If you want to concentrate on cash first then fine, but if you've got any spare money left over that needs a home then the choice is between a top savings account paying 5.8% gross, (4.64% net for a BRT or 3.48% for a HRT) or using a SS ISA and investing it.

Bonds might not do well in a rising inflation economy, but beating 3.48% is likely. And I'm fairly hopefull they'll come close to the 6% cash ISA over the year too.

Don't get me wrong, I think Isa's are a very good thing. It's just I think too many people are concentrating on the Cash side, and ignoring the SS side that they can have as well. Use it or lose it.

Cheers,
Judwin

StevieJ

jamesd wrote: »

I don't see anything in the rules here that prohibits people from recommending and suggesting specific funds, provided it's not a professional doing it for profit. I've been considering starting some sector-specific fund discussion topics, with some initial fund choice thoughts, just haven't gotten around to it yet.

Now Jamesd that would be one excellent idea and truly in the spirit of this board. It would be great to see funds selected then critically analysed by board members.

StevieJ

Judwin wrote: »

Fair enough, but the cash/SS ISA decision is not an either-or. You can have a £3000 Cash ISA and a £4000 SS Isa every year. If you want to concentrate on cash first then fine, but if you've got any spare money left over that needs a home then the choice is between a top savings account paying 5.8% gross, (4.64% net for a BRT or 3.48% for a HRT) or using a SS ISA and investing it.

Bonds might not do well in a rising inflation economy, but beating 3.48% is likely. And I'm fairly hopefull they'll come close to the 6% cash ISA over the year too.

Don't get me wrong, I think Isa's are a very good thing. It's just I think too many people are concentrating on the Cash side, and ignoring the SS side that they can have as well. Use it or lose it.

Cheers,
Judwin

No not the only choice, NS&I tax free saving certificates currently pay nearly 6% tax free for a higher rate tax payer ( 9.75% gross).
Don,t get me wrong I am well invested in SS but different people have different risk profiles and when faced with the question are they prepared to lose 40% or 25% of their portfolio in a crash they answer no.

StevieJ

lisyloo wrote: »

My property is my home and I'm not intending on moving.
At the moment I'm not overpaying because I have a fixed rate of 4.64% and can get more than that elsewhere.
I have to be "involved" in property to a degree because I need to live somewhere.
I'm not interested in "selling to rent" partly because I think it's too risky but also because I have a lovely home that isn't easy to replace.
I recognise that we are in a bubble but renting long term does not make sense . With buying I expect to be paying a mortgage for 10 years and then have 30 years rent free. Renting long term does not stack up compared with that although I agree it's not a good idea to invest at the top of a bubble (I haven't done that).

I totally agree with you, I actually meant property as a secondary investment. I think the general concensus is that your primary property should not be included when discussing investments.

lisyloo

I think the general concensus is that your primary property should not be included when discussing investments.

Well I didn't want to get too bogged down in that but I don't agree with the "general concensus" although my circumstances may be different to others in that I have "excess" housing.
My current housing is in excess to my needs and I could therefore downsize whenever I wish.

Now I'm very well aware that there is a big difference in liquidity between selling a house and taking money out of an ATM, however there is still equity there that can be released (and as we are 40% LTV there is still very liikely to be equity in a downturn).
Money could certainly be raised more quickly via a mortgage or secured loan albeit at a cost.

I don't see why equity tied up in a property can't be consider an investment IF you are not in need of it to live in.

Assuming everything goes to plan then we would probably choose to downsize sometime after retirment and free up a 6 figure sum.

Even if we permanently needed to live in it, then I still consider 30 years of rent free living to be something of an investment.

I would like to understand why people don't consider either a large lump sum or 30 years rent free living as an investment.

zag2me

Just to compare I had in the last financial year:

- 13,000 in a cash isa which made around £550 in interest
- 1,000 in a stocks and shares isa which made £250 in gains.

I wish I had put more into my funds in the stocks and shares isa last year as the market went really well.

baby_boomer

Suppose you had put £7K into a stocks ISA and the market had fallen 15%.

How comfortable would you be feeling then?

If you'd be cool about about the situation, then stocks may be for you.

If you would be full of regret and fretting about all that hard-earned money down the drain, then perhaps they are not.

jamesd

baby_boomer, 18% down within 6 weeks of investing is what happened to me last year. One fund that is effectively an emerging markets fund, so that's not unexpected. Currently about 11% up one year after that drop. It was a useful test of how serious I am about my risk profile.

4000 into a single fund that behaves like an emerging markets fund isn't an ideal investment choice, though - not what I'm doing today.