Novice investment fund

richyg

You might want to be careful about "starting over again".

There are rules about opening ISAs with more than one provider in one year.

I believe you can transfer between providers but you cant open more than one - so you need to research the rules.

HL will charge a transfer fee or an account closure fee, depending on what you are trying to do.

To be honest you might be best leaving things as they are for a bit , learn a little , and act to get to you a final situation that you are happy with next April tax year.

You might be a few pounds out of pocket but that may be better than getting yourself messed up with HMRC . I was on hold for more than an hour trying to talk to them once.

Act in haste , repent at leisure

Alexland

I agree the investments you have now made, having corrected the 2xLISA error, are not bad so no need to act in haste. Even though HL are a bit expensive they are the UKs biggest DIY shop so lots of others are in the same boat including a lot of very rich people!

The LISA fee difference at 0.05% would not make it worth paying the £25+vat HL exit fee to transfer the LISA to Nutmeg so I would just stick with HL for a now. There is no LISA option with Vanguard Investor direct so you are paying about the right level of LISA fees. At least you have now had the learning experience of using a DIY platform.

If your LISA grows above £20k then consider switching to AJ Bell YouInvest (the Manchester version of HL) as they would be 0.20% cheaper than HL but charge £1.50 per fund trade which over 12 months of regular contributions (assuming you invest the previous month's bonus at the same time) would be £18. This would normally break even if the balance was at least £10k (as you would be saving 0.2% but paying 0.18% in trades) but you would have to pay the £25+vat HL exit fee so your break even would be if the balance was £20k over 1.5 years (to recover £20 in year 1 and £10 in year 2). But reassess the market at the time incase there are even better offers.

In terms of the ISA why not give Nutmeg a go for a while but it would cost nothing to switch from managed to fixed allocation for cheaper fees. You might need to wait a few days for the initial investment to settle down and after placing the switch order it will take a few days to occur as Nutmeg only trade twice a week.

Also the ISA would be even cheaper with Vanguard Investor direct at Vanguard.co.uk and Nutmeg have no exit fees if you choose to transfer it and risk time out of the market. If you want to initiate a transfer create a new account with Vanguard and give them details of your Nutmeg account (but not the password). Don't just close the old account and withdraw the money.

So for now just sit back and have fun watching your LISA money go up and down. On the ISA consider if you want to change to Nutmeg fixed or transfer to Vanguard. If you leave the ISA alone it might give you the chance to compare the active ISA Vs passive LISA investment approaches.

Remember you don't make a loss unless you sell at less than you paid so don't worry if valuations move around - those are reflecting other peoples trades not yours!

Also remember the max you can contribute to a LISA per tax year is £4k and the max on a S&S ISA is £20k minus any contributions to other ISAs (so £16k if you were to fill the £4k LISA) and had no other ISAa. The 25% bonus on a LISA doesn't count as a contribution. Your first bonus will be in April or May 2018 and then about a month after each contribution. As you are using HL the bonuses will appear as cash so you will need to login and tell them to invest it.

Alex

tony863

Thanks for both bits of advice. If anything, I'm glad you're giving me this help as I'd be lost otherwise. I can see that lots of other people have also been reading it so maybe it's also helping others to avoid the pitfalls!

As you rightly say, I can't just start over and have to consider the impact of trying to close one and start up another. I think I'll try to confirm Nutmeg will close the LISA instead of just emptying it. Otherwise, it'll stay open as far as HMRC are concerned.

So my plan is to firstly stay with HL (for the moment) and keep the LISA going with them. I'm going to top that up to £4k to get the most out of the Government bonus. I'm assuming that I won't get the full £1k bonus as I won't have had the account open for the full financial year?

Another question regarding HL - taking your advice from the last post, I now intend to open an account with vanguard and transfer towards their ISA. I can then invest in the VLS60 as originally intended. With that in mind, do I need to pick a new fund for the HL LISA? I've currently got my HL LISA money going to the VLS60 fund and it seems that I should consider something else instead of keeping it all in one fund.

Regarding Nutmeg, as above, I'll cancel the DD and get it all moved over to Vanguard. It makes sense as there are no fees, whereas the HL fund will include fees so it makes sense to leave it be for the time being.

I've no doubt I'll have more questions as time passes simple as bare with me. Thanks as always.

Tony

Eco_Miser

tony863 wrote: »

I'm assuming that I won't get the full £1k bonus as I won't have had the account open for the full financial year?

You're assuming again. The bonus is a one-off (for each contribution) and covers the whole period from when you paid in to your 60th birthday (or you buy your first dwelling).
If you pay in £4k next year, you'll get a £1k bonus on that too, but covering a period a year shorter.

Generally, please slow down and check on all the requirements and possibilities BEFORE altering your financial arrangements again.

Sarastro

Why would you pay AVC's on a defined benefit scheme?

Alexland

Hi

I have done some research into your 2xLISA problem and suggest you talk to both providers before taking any action.

The LISA opening process does checks with HMRC and the Create Account API would return an error 409 Conflict which mean a LISA already exists. This may happen shortly after you do the online registration with the provider.

As such you may only have one LISA after all and which one it is might depend on which provider reported it to HMRC first. As such you may not get a choice and the failed LISA provider may already or soon be aware that it was an invalid account opening.

I wouldn't just close the one you don't want incase it's the one HMRC recognises to be open.

In terms of having both investments in VLS (if your LISA is with HL and ISA is transferred to Vanguard) that's fine for now and the amount of money we are talking about but if you wanted to consider similar Blackrock, HSBC or L&G funds for the HL account that would also be fine.

The main priority for now is sorting out the provider accounts not the funds.

Ps HMRC don't care how long the contribution had been in the account as long as it occured during the tax year you get a 25% bonus on a LISA up to £4k contribution and £1k bonus per year.

Alex

bigadaj

Sarastro wrote: »

Why would you pay AVC's on a defined benefit scheme?

Because you can't on a defined contornution scheme?

Dansmam

Sarastro wrote: »

Why would you pay AVC's on a defined benefit scheme?

Reduces NI and you get tax relief at your marginal rate. Plus if you don’t want to take a reduction on the DB pension, but still retire early, you can transfer the avc funds out and use them to bridge the gap. At least that’s how I understand it. Someone may be along in a moment to tell me I’m wrong but I do hope not as I’m rather counting on avcs to save me from coming late to the pension table.

tony863

Alexland wrote: »

Hi

I have done some research into your 2xLISA problem and suggest you talk to both providers before taking any action.

The LISA opening process does checks with HMRC and the Create Account API would return an error 409 Conflict which mean a LISA already exists. This may happen shortly after you do the online registration with the provider.

As such you may only have one LISA after all and which one it is might depend on which provider reported it to HMRC first. As such you may not get a choice and the failed LISA provider may already or soon be aware that it was an invalid account opening.

I wouldn't just close the one you don't want incase it's the one HMRC recognises to be open.

In terms of having both investments in VLS (if your LISA is with HL and ISA is transferred to Vanguard) that's fine for now and the amount of money we are talking about but if you wanted to consider similar Blackrock, HSBC or L&G funds for the HL account that would also be fine.

The main priority for now is sorting out the provider accounts not the funds.

Ps HMRC don't care how long the contribution had been in the account as long as it occured during the tax year you get a 25% bonus on a LISA up to £4k contribution and £1k bonus per year.

Alex

Thanks Alex,

I opened the LISA with HL before Nutmeg but you're right, I need to check. I'll be on to them tomorrow and see what happens from there. I'm not in a rush to get the accounts switched over until I know for sure where I stand.

Cheers

Tony

bigadaj

Dansmam wrote: »

Reduces NI and you get tax relief at your marginal rate. Plus if you don’t want to take a reduction on the DB pension, but still retire early, you can transfer the avc funds out and use them to bridge the gap. At least that’s how I understand it. Someone may be along in a moment to tell me I’m wrong but I do hope not as I’m rather counting on avcs to save me from coming late to the pension table.

The NI issue would still apply to any salary sacrifice scheme but is still a benefit, certainly for a basic rate taxpayer when compared to a private pension.

I'm not sure that all schemes allow you to transfer out the AVC portion, some also force you to take them when you access the db pension, I think that is scheme specific.