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new to s&s isas
Comments
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InMyDreams, the charges are taken out of the dividends paid on the shares the fund holds or by selling some of the shares. You're right that this shows up as a reduced value for the fund and lowers its apparent performance.0
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Thank you so much to jamesd and dunstonh. I've been doing loads more reading up and I'm slowly getting there. I love the comparison graphs on HL and at the moment I'm planning to do as suggested and try out something like one of the HL multi-manager funds while I find my feet and learn more. (Although when it says on the key features min investment £1K, presumably that's for lump sums and doesn't apply if wanting to save regularly, say £50/month. Or am I way off the mark?)
I'm still getting stuck with one more thing though. I also need to make a decision about this endowment. Do I cash it in and max out a maxi isa? I just can't get my head around the figures though. Obviously I'm not comparing like with like. On the Countrywide website it shows some past performance figures and gives Lipper as it's source. I've found the Lipper site but I can't find any info on my funds there (Countrywide CA Managed). I've found them on https://www.trustnet.com and have worked out that it's a balanced, managed fund. The figures don't look good (although they could be worse, it seems to be in the top half... just) but the fees I'm paying seem tiny. I know I've already paid through the nose and I can't take that back, but having forked all that out, I'm now paying very little (£42.60 per year on a fund that's worth £6.5K). (£42.60 made up of £2.80/month plus 5% of my £15 premiums. I reduced the premiums to a minimum a ages ago while I decided what to do, but haven't yet.) But clearly that means nothing if the returns are not good enough.
Anyway, just wanted to update and tell how much I've appreciated your input and help.0 -
The minimum investment of a thousand will apply for lump sum purchases on the web site. It doesn't apply to telephone orders or regular investing.
If you need to get around the web site limit and have 1000 available you can buy 1000 of one fund then sell portions of it to buy the others. But phone dealing works fine and avoids jumping through hoops.
Getting 10% per year return including the bad years isn't quite good compared to many but since your fund is currently not in the top quarter or better, you can probably do better by changing it.
Don't be too unhappy if two weeks after you do it the markets fall by 10% or 20%. It happens... you're after the long term view, not the short one, though that would be quite a test of your self-confidence!
I can imagine half of the people here coming to lynch me when the markets fall by 30%... hopefully they will be too busy and wait a couple of years for a recovery, then notice they don't need to do it after all. 0 -
Thank you again, as ever.The minimum investment of a thousand will apply for lump sum purchases on the web site. It doesn't apply to telephone orders or regular investing.
Yes, that's what I thought I'd read somewhere.If you need to get around the web site limit and have 1000 available you can buy 1000 of one fund then sell portions of it to buy the others. But phone dealing works fine and avoids jumping through hoops.
Oh, that's clever. Hadn't thought of the selling portions of it. I could have £1000 available that I'd be prepared to invest without cashing in the endowment. But not much more without dipping into emergency funds, which is why I'd assumed I'd start playing with a small regular amount just to get my feet wet.Getting 10% per year return including the bad years isn't quite good compared to many but since your fund is currently not in the top quarter or better, you can probably do better by changing it.
But I'm still concious I'm not comparing like with like. I've already paid most of my fees. I'm now paying far less than 1% and this proportion will go even further down as it's not related to the value of my fund. I can't work out what the effect of that will be. Taking, for example, the HL Multi-Manager Special Situations, the TER of 2.08% brings a Yield reduction at 6% to 3.30%. That seems steep. How do I work out what my TER is for my endowment? At the start, in the key features document of the endowment, I am quoted a Yield reduction at 6% to 4.8% which seems better. And given that I've already paid all those fees up front, from here on in, presumably my yield reduction is tiny now. (Tiny TER?) Plus I get my bonus units every five years. Or am I still barking up the wrong tree re how the fees work. Yes, if I was comparing the products from scratch, it would be easy, but I'm not. Knowing what I know now, I'd never have taken out this endowment, but simply cashing it in won't change that. I've already lost all those fees and changing products now won't change that. I've got to make the best of a bad start.Don't be too unhappy if two weeks after you do it the markets fall by 10% or 20%. It happens... you're after the long term view, not the short one, though that would be quite a test of your self-confidence! I can imagine half of the people here coming to lynch me when the markets fall by 30%... hopefully they will be too busy and wait a couple of years for a recovery, then notice they don't need to do it after all.
Yes, I'm after the long term view. We're in our early/mid thirties with three small children and a huge mortgage. We could have cashed in the endowment in 2003 when we moved and it was worth less than 2/3 of what we had paid in, but didn't. Thank goodness. Because at that point we would have knocked the value off our mortgage. At least we're in a better position than had we done that.0 -
One other thought: you can deal by post for much lower amounts. I have done lump sum payments to them for as little as £250 ... it may be possible to do less. Give it a try, they're not going to turn you down!If you need to get around the web site limit and have 1000 available you can buy 1000 of one fund then sell portions of it to buy the others. But phone dealing works fine and avoids jumping through hoops.0 -
The fees will still be there. They could tell you what they are but it's not really important. Instead, take a look at their 5 year performance for the managed fund and compare it to the 5 year performance in the balanced managed sector appropriate for ISAs (not life funds).
The one you have apparently grew by 20% over 5 years. Every one of the ISA-compatible balanced managed funds with five years of history did better, the worst growing by 31% after fees. The top 25% all grew by at least 54% and the top 10% by 65%.The Hargreaves Lansdown Balanced Managed grew by 55% after fees.
It's not solely about the fees, rather it's about the growth after the fees. You've been led astray by the use of standard numbers for the yield reduction that don't take into account the actual performance of the different funds.
Over 5 years your current one grew at 3.7% a year with annual compounding. The Hargreaves Lansdown one grew at 9.1% a year and the top 10% grew by at least 10.5% a year, all after fees.
The yield reduction matters but you also have to consider what yield you're starting from and it's better to lose two percent from 10.5% than 0.5% or 0% from 3.7%.
If you had two funds that had close performance the yield reduction from fees could be significant (but it would show up in the performance already...). It's not when the differences are as large as they are between what you currently have and what is available elsewhere.
Now consider that you could mix in some of the HL MM Income and Growth Portfolio, which grew by about 80% over just three years, equivalent to 21% a year with annual compounding. Or in the same Equity Income sector the very well regarded Invesco Perpetual High Income which grew by 99.9% over 5 years, equivalent to 14.8% a year with annual compounding (including a drop year at the start, unlike the HL one with three years of history).0 -
Many thanks again.The fees will still be there. They could tell you what they are but it's not really important. Instead, take a look at their 5 year performance for the managed fund and compare it to the 5 year performance in the balanced managed sector appropriate for ISAs (not life funds).
Yes, I've been looking at these tables too. I think the 20% is a bit out of date as it's to 31.03.07. Looking at the records I have (yes, I'm that sad, I've been keeping records of the unit prices over the years) I make it closer to 33% which agrees with trustnet and brings it in line with the bottom of the table you linked to. Looking at the last 3 yrs, its getting close to half way up the table, and for the last year, bang in the middle equivalent to 65/131. Hmm. Take your point though.
I certainly should be able to do better.
So does 'life fund' means it's fixed term? Is that (fees apart) the main difference between endowments and the sorts of funds you can hold in an isa?
And presumably there will be tax implications if I keep the endowment as it's no longer linked to repaying a mortgage.It's not solely about the fees, rather it's about the growth after the fees. You've been led astray by the use of standard numbers for the yield reduction that don't take into account the actual performance of the different funds.
Yeah, that sounds like the guy who sold us the endowment in the first place :rotfl: You don't have to look at what's written down, they only say that to cover themselves... But yes, I do understand what you're saying.Over 5 years your current one grew at 3.7% a year with annual compounding. The Hargreaves Lansdown one grew at 9.1% a year and the top 10% grew by at least 10.5% a year, all after fees.
Again, using equivalent time periods, mine was more like 5.6% with compounding over 5 years. Am pleased to see though that over the last three it was 13.3% per year (calculated using the 45.5% figure from the above link). Not pleased that this is good (I can see now that it isn't compared with the funds you've linked to) but pleased because my maths has been serving me correctly...InMyDreams wrote: »because in the last 3.5 years it's averaged at over 10% per year after charges.
Oh, now hang on... so the 13.3%pa would have been *before* charges as that's what the unit prices have risen by. My 10% took into account the 5% of each premium I lost and the £2.80/month admin fee. Or should I say the 13% is after all the hidden charges. Still, I suppose it's all immaterial as (for example) the HL grew at an averaged 16.6%pa over the same 3 years. How do I work out how much of that I would have seen?If you had two funds that had close performance the yield reduction from fees could be significant (but it would show up in the performance already...). It's not when the differences are as large as they are between what you currently have and what is available elsewhere.
So how close is close? Seems to depend on what time frame you choose.Now consider that you could mix in some of the HL MM Income and Growth Portfolio, which grew by about 80% over just three years, equivalent to 21% a year with annual compounding. Or in the same Equity Income sector the very well regarded Invesco Perpetual High Income which grew by 99.9% over 5 years, equivalent to 14.8% a year with annual compounding (including a drop year at the start, unlike the HL one with three years of history).
Yes. I'm getting this. I can't find Invesco Perpetual High Income on HL site though. Only the Invesco Perpetual Income one. But if I cashed in my £6.5K worth of endowment, I could make it up to £7K and stick the whole lot into an ISA with HL and pick, say, 7 different funds using the tables on the trustnet site.0 -
Life funds have an insurance component to them that isn't really significant here, except it means they have to be reported separately from others. There's no fixed term in the fund itself, but can be in the policy that uses it.
I'm not aware of any tax implications for taking the endowment value now, possibly someone else might be aware of something.
Please tell me the unit prices and I might be able to tell you what I make of the growth rate. I don't currently understand why their site reports one set of results and you're getting another.
Prices should be after charges everywhere, including in the change of price of your units. You'd have seen all of that HL growth. Though it may well be lower for both for a few years, since we have been in a major growth situation in the last few years.
The closeness would show up in the performance. I think I may have seen a 0.25% difference when comparing the UK Old Mutual fund to the SLI version - the Old Mutual one raised its annual management charge by 0.25% and then started performing less well than its competitor.
INVESCO PERPETUAL High Income: Accumulation version, Income version.
With talk of picking 7 different funds you're definitely getting the idea! 0 -
Life funds have an insurance component to them that isn't really significant here, except it means they have to be reported separately from others. There's no fixed term in the fund itself, but can be in the policy that uses it.
Oh, now you mention the insurance thing, I think ours does have a guarantee that it will pay out at least £5K if one of us dies before the end. This was the minimum we could set it at when we slashed the premiums. I assumed that stopped being relevant once the fund was worth more than that, but of course it could always fall again. And I prefer to assume that we'll still both be alive to see it, either way
I'm not aware of any tax implications for taking the endowment value now, possibly someone else might be aware of something.
I was thinking more of what will happen tax-wise whenever it is cashed in, either now or in 2025 when it matures. I had assumed that there wouldn't be any tax to pay if we cashed in now as it's still relatively small. Especially compared to how much we've paid in. :eek:Please tell me the unit prices and I might be able to tell you what I make of the growth rate. I don't currently understand why their site reports one set of results and you're getting another.
I think the discrepancy is because their site's showing 5 years to 31.03.07. I think the price was probably quite a bit higher on 31.03.02 than in June that year. I'm working out based on 5 years to today and that agrees with trustnet's figures. Actually, my records only start 11.08.03 (sell price of 232.5), so I made a sort of guesstimate based on the graphs at trustnet, so maybe it's not so surprising that they agree :rolleyes: . And exactly three years ago I was somewhat preoccupied with the birth of my third child so records are quite scant for that time, but on 14.04.04 the sell price was 243.7 and on 08.11.04 the sell price was 250.8.
For the 1yr I have exact figures so have been using these to try to get my head around how the numbers work. On 08.06.06 the sell price was 301.2. On Friday (08.06.07) it was/is 343.5, an increase of 14.04%. (This ties in exactly with the trustnet site.) Or maybe that's just coincidence? Had I taken out my £5505.84 on that date and put it in a saving account together with all the future £15 premiums, to achieve the £6414.23 it's worth today, it would have required an interest rate of 13.00%apr. (And taking 9th June figures, the results are 15.50% and 14.42%apr as the price dropped to 297.4 on 09.06.06.) So the way I've understood it, is the trustnet figures take into account the unit prices, and hence all the 'hidden', underlying charges, but not the 5% commission due to buying at the 'buy' price or the £2.80/month charge I pay (deducted as units from my capital). In other words, the effect of the underlying charges, whatever they are, show up in the growth figures for the unit prices. The effect of the monthly charges and 5% initial charges that are deducted as I go along are reflected by the difference between those growth figures and the actual figures that my own pot of money has grown by.
What I'm not clear about is how the TER values can take both into account as they are not necessarily dependant on the value of the fund.Prices should be after charges everywhere, including in the change of price of your units. You'd have seen all of that HL growth. Though it may well be lower for both for a few years, since we have been in a major growth situation in the last few years.
How could the prices be after charges everywhere? £2.80/month is not dependant on the size of my capital. It will therefore have a different impact on different policies (percentage wise). Even the 5% commission is dependant only on the premium, not the current fund value. The effect will be different for everyone (and even different for me as the years progress). I know for the HL there wouldn't have been the 5% initial charge, but presumably if I was to buy this fund through a different broker there would be, so would their performance graphs be different?The closeness would show up in the performance. I think I may have seen a 0.25% difference when comparing the UK Old Mutual fund to the SLI version - the Old Mutual one raised its annual management charge by 0.25% and then started performing less well than its competitor.
So does this mean that the annual charge is reflected in the unit price too, rather than deducted from capital? I'm still not clear how this would work.INVESCO PERPETUAL High Income: Accumulation version, Income version.
With talk of picking 7 different funds you're definitely getting the idea!
Yes, but which 7??? (That's a rhetorical question, btw
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I haven't checked how H-L handle the difference in AMC. I hope that they do factor in any AMC reductions.
Bid to bid seems the common way places compare, removing the initial cost from the comparison. So you'd still have to allow for that yourself.0
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