Moving from S&S ISAs to pensions (retirement plan)?

JustAnotherSaver

This is something i was wondering about today & thought i'd come here for a bit of advice or maybe different ways to look at the situation.

I've stopped paying in to a S&S ISA & my retirement money now goes in to a Cavendish SIPP. My wife & my siblings however still pay in to a S&S ISA, though they want to go the pension route.

I'm wondering if maybe it'd be better to transfer existing S&S ISA money to a LISA and then start from scratch with a pension? Even if investing in the same funds?

My thinking is that currently they will have bought units at varying prices (as they contribute monthly). So this month their (for example...) £100 may buy 5 units, next month it may buy 15 units, so on & so forth. These (if i'm understanding properly) will individually go up & down in value, raising & lowering their pot value accordingly. So some months they may have bought quite high whereas other months it may have been quite low.

If they take all this money out though & put it straight in to a pension, even same fund, then they will buy an amount of units at 1 price - the price at investment, unlike their S&S ISA which it'll currently be many different prices since they've deposited monthly over a course of years.

So would it be better to just transfer that money to a LISA (would it get the 25% bonus with a transfer rather than a deposit?) so that their value will remain as lots of little investments at varying prices & then go from now in to a pension

or would it be better to withdraw the money & put it all straight in to a pension, buying the units at one price?



Hopefully someone can decipher what i'm trying to ask & be able to respond I tried to explain it as best i could.

Linton

You seem rather confused. When you make a series of purchases of an investment at different prices they dont go into different pots, they are all exactly the same investment which happened to cost you more or less at different times. What they cost originally is of pure historic interest only, it has no affect. Having bought them, the only thing that matters is what the price is when you sell them and they will all sell at the same price.

I hope that is clear, I am trying to think of a non-investment example. Lets say you buy potatos every day at a supermarket at whatever price the superemarket happens to charge on that day and put then in your potato store. And each day you chose some for your supper. Does choosing cheaper or more expensive potatos for your supper make any difference to anything? How do you tell the difference?

Apologies if I have misunderstood what you are saying.

JustAnotherSaver

Linton wrote: »

You seem rather confused. When you make a series of purchases of an investment at different prices they dont go into different pots, they are all exactly the same investment which happened to cost you more or less at different times. What they cost originally is of pure historic interest only, it has no affect. Having bought them, the only thing that matters is what the price is when you sell them and they will all sell at the same price..

I knew i wouldn't have done a good job at explaining what i was asking :rotfl:

I know it doesn't go in to different pots. In the account it's still listed as 'Vanguard LifeStrategy 60' for example.

I'll have another do at explaining but i'll keep it to 2 contribution months to try and make it easier?

January you put in £100 to a fund which at the price it is at it gets you 10 units.
February the price has dropped so your next £100 gets you 20 units.
March you don't contribute (just to try and make this easier to explain) ... the price has shot up (so i don't know, let's say if you did invest that month your £100 would only get you like 1 unit, or 2 units - a low number compared to previous months)

So your initial £100 = 10 units let's say that is now worth £150
Your second £100 = 20 units is now worth £200 (i'm really just throwing figures around for examples sake here)

So you have invested £200 out of your pocket but your pot is now worth £350.

Had you just lumped £200 in at the start

Hmm, you know when you start saying/typing something & part way through you realise your thought process was wrong?

Yeah, well that! :rotfl:I'll hit the post button anyway so you can have a giggle

So basically it would be just as well to withdraw all the cash from the S&S ISA and put it direct into the pension in 1 lump after all

AlanP_2

Yes, because the sell price in the ISA will equal the buy price in the Pension so compared to your average buy price to date you will be in the same position.

In practice there may be a slight lag between the Sell & the Buy so the prices won't be the same so you might "win" or "lose" a bit.

Alexland

Whenever you move between tax wrappers (even S&S ISA to LISA) the assets will need to be sold to be checked against the annual limits. The risk you take is being out the market a few days or longer if the transfer is delayed.

If you transfer up to £4k of an existing ISA (previous or current year contributions) into a LISA you should still get the bonus but check with the provider first. It's easier to just redirect new contributions into the LISA assuming you have enough remaining ISA allowance.

In terms of accumulated gains you should take these with you as, assuming markets have not moved and excluding fees, your cash withdrawal will buy you the same number of fund units as you previously held. It is no more risky buying a large lump sum of units than holding them in your old wrapper.

However the new account will not know about these historic gains so you may loose access to long term reporting data. If it's that important to you you could export it and track it in a spreadsheet.

Alex

LHW99

I suppose if you need income, then if you sell all the units and get the £350, but when you buy back you get fewer "new" units because the price has gone up, you may get a smaller dividend payment on the new purchase initially, as that is based on the number of units held.
The absolute magnitude of that would depend on the value of the units (not much for £350, but perhaps significant on £350k).