Low Cost Platform For Small Investment?

crittertog

Hi all,

One of my relatives has asked me to look into investing a lump sum (£2,500) for their child, which will be held for 10+ years. As far as I'm aware, they are not looking at making further contributions (or if they are, they will be very infrequent).

I was thinking of suggesting Vanguard LifeStrategy (either the 100% or 80% equity version), however I'm not sure of the best way to buy it, especially given that it's relatively small sum - can someone suggest a good low-cost option?

I've had a quick look at Cavendish (whose web site is less-than-easy to find things on, e.g. fees and fund selection pages slightly burried), and Charles Stanley Direct, both of whom charge 0.25%/yr (although CSD do charge £10 for withdrawals).

Are there any others I should look at?

Thanks

westy22

If you decide on a 100% equity investment - which is reasonable for a 10+ year strategy, then you could consider a Vanguard World Tracker ETF such as VWRL which you could buy for £5.95 with http://www.x-o.co.uk and no admin or holding fees.

Kendall80

westy22 wrote: »

If you decide on a 100% equity investment - which is reasonable for a 10+ year strategy, then you could consider a Vanguard World Tracker ETF such as VWRL which you could buy for £5.95 with http://www.x-o.co.uk and no admin or holding fees.

XO offer a very good no-frills service. Although if you do decide to add to the amount at anytime in the future you will have to pay another £5.95 each time.

arbster

You could try http://www.comparefundplatforms.com/

Appears to recommend Halifax Sharedealing, with a one-off £25 cost and no ongoing charges. X-O would of course be cheaper if you were happy with an ETF, and Halifax would charge £12.50 if you wanted to add to it.

crittertog

Thanks for the help, guys - I'd never heard of CompareFundPlatforms.com before (although it's kind of obvious one must exist)!

Looks like I'm looking at the Vanguard fund via Halifax Share Dealing (£39 for 10 years, plus £12.50 to cash it in), or the Vanguard ETF via x-0 (£18 for 10 years, plus £6 to cash it in).

Going via an [J]ISA starts getting a lot more expensive, with the cheapest being Cavendish for funds (£172 for 10 years, no exit fees), or x-o for ETFs (£18 for 10 years, plus £50 to cash it in)...

bigfreddiel

Degiro.co.uk charges £1.75

Vwrl pays dividends in USD so there is a currency risk straight away and a cost to reinvest, etf's cannot be included in dividend reinvestment automatically.

Instead buy Ishares SWDA it's a global msci accumulating etf with a ter of .2%

Cheers fj

grey_gym_sock

bigfreddiel wrote: »

Degiro.co.uk charges £1.75

degiro's terms & conditions (except for their "custody" account) say that they are allowed to lend out your shares. they pocket the stock lending fees (which is presumably why their explicit charges are so low), but you're taking on a risk in case the counter-party fails to return the shares and the security provided is insufficient and degiro themselves go bust. that is a lot of things that would need to go wrong before you lost anything, so it is a very remote risk, but is it worth taking it on in order to save a couple of quid in fees? most other platforms (at least in the UK) aren't allowed to lend out your shares, AFAIAA. and there are other platforms which are very nearly as cheap as degiro. personally, i'd avoid using them for this reason.

degiro's "custody" account doesn't allow them to lend out your shares (so this is more like the service that most other platforms offer). but it has high fees for processing dividends, viz. €1 + 3% of dividend (maximum of 10%). which is enough to make them noticeably more expensive: e.g. if you held shares/ETFs yielding 3%, then you'd be paying between 0.09% and 0.3% per year in dividend processing fees.

aspiration_2

westy22 wrote: »

If you decide on a 100% equity investment - which is reasonable for a 10+ year strategy, then you could consider a Vanguard World Tracker ETF such as VWRL which you could buy for £5.95 with http://www.x-o.co.uk and no admin or holding fees.

Hello westy22:

I have been unable to get clear answers to certain queries of mine, from several of these platforms including the top ones. I got passed around till an adviser finally made a guess

When it came to dividends from VWRL, VUSA etc, does any tax gets withheld? Irish or US? How does it work in an ISA?

I am sure loads of you have VUSA. Please share your experience.

Thanks

grey_gym_sock

aspiration wrote: »

When it came to dividends from VWRL, VUSA etc, does any tax gets withheld? Irish or US? How does it work in an ISA?

suppose a US company declares a dividend of £180 (OK, it would be in $, but let's not over-complicate this).

under the US-irish double tax agreement (DTA), 15% tax is withheld on dividends, so £27 is withheld and the irish ETF actually receives £153.

(that applies to VUSA, and to the US holdings in VWRL. for the other holdings in VWRL, it depends on other countries' withholding tax rates and DTAs with ireland.)

the ETF will use some of the income to pay its own running costs, and pay out approximately what's left over. but let's ignore that, and suppose it declares a dividend of the full £153.

ireland doesn't withhold any tax on distributions from ETFs.

so you receive £153. and you also (this the same as for UK dividends) receive a "tax credit" of 1/9 of that amount, viz. for £17. however, this "tax credit" is not reclaimable, even if this is inside an ISA or pension.

if this is in a taxable account, then you have £170 gross income (£153 + £17), and £17 tax paid, which means you have no further liability if you are a basic-rate taxpayer (since dividends are taxed at 10% in the basic rate). if you are a higher/additional-rate tax payer, you have more to pay.

what if you had invested via a UK fund, instead of via an irish ETF?

for US dividends, the UK-USA DTA also allows for 15% tax to be withheld, so the fund would receive the same income as the ETF. for income from other countries, i'm not sure exactly what would be withheld.

when a UK fund pays out dividend income, there is the same non-reclaimable 10% "tax credit" as for the irish ETF.

so the end result is very similar.