S&S ISA vs LISA vs Current Accounts

dqnet

Hi, a little bit of a newbie question. Page 9 and 10 of this Nutmeg document (https://resources.nutmeg.com/Nutmeg-Lifetime-ISA-Information-Pack.pdf) states that after charges, fees and inflation a 5% growth on your investment would be the equivalent of a 1.75% growth.

Am I wrong in calculating that 5% - 1.75% = 3.25% actual growth (minus the bonus assuming you were doing a S&S ISA only).

Would that mean if you kept your money in a compounded interest account earning 3.25% until you were 60 you would get similar results?

Thanks

Prism

If you were indeed getting 3.25% actual growth and you could find an account which paid the same interest then yes you would get the same amount at the end. However the actual growth isn't displayed in that document - it would basically be 5% minus fees which can run from a couple of tenths of a percent to several percent.

The main problem with these type of guidelines is that the 5% is a pure guess. Over a long period it could be much more or less than that depending on what the ISA is invested in.

jkwer521

Not quite. 3.25% is the estimated fees and inflation together and 1.75% is the real growth.

What you don't know is how much of the 3.25% is fees and how much is inflation. Say fees are 1.25% and inflation is 2%, then you would need growth of 3.75% (2%+1.75%) to match it

As mentioned above, 5% is a guess anyway, so the table isn't really very helpful.

dqnet

Oh right. So in general if you include the bonus you would definitely be one step ahead of all the issues however if the bonus wasn't included then in actual fact a fixed savings account of lets say 20 years (if they existed) at around 3.75% pa would yield exactly what a stocks and shares ISA could do at 5% because of fees and charges in all these platforms?

In general what is the growth margin stocks and shares ISA yield over lets say 15-20 years..?

jimjames

dqnet wrote: »

In general what is the growth margin stocks and shares ISA yield over lets say 15-20 years..?

This shows returns over last 60 years. Note it's a log scale

http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm

This shows UK returns
http://www.thisismoney.co.uk/money/investing/article-2958803/Cash-stocks-property-best-returns-past-30-years.html

dqnet

jimjames wrote: »

This shows returns over last 60 years. Note it's a log scale

http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm

This shows UK returns
http://www.thisismoney.co.uk/money/investing/article-2958803/Cash-stocks-property-best-returns-past-30-years.html

Thanks for that. If you take the general trend your looking at around 7% - any platform fees, charges, inflation, dealing fees, etc. It seems that if a 20 year fixed term deposit account existed paying around 4.0% (+-0.25) you wouldn't be too far behind someone who simply invested all over the place for the extra 1% or so extra!

I guess the real savings come in these government initiatives (ISA wrappers and Pension tax reliefs) which help keep us ahead.