Isa advice for total newbie

Snapdragon

Bear with this newbie please....

I want to put a lump sum of £20,000 into a S&S ISA before the end of the tax year but having never had an isa of any kind or invested in any way (if you don't count my pensions), I'm really nervous of just doing the wrong thing, but I know continuing to leave it in the bank not even getting interest is definitely the wrong thing!

I did get an IFA out for some advice a couple of years ago (choosing the top listed local IFA on unbiased and vouched for, since I had no idea where else to find one) but unfortunately he didn't want to know, unless I bought expensive critical health insurance that I didn't want, that he no doubt would have made a lot of commission on. The only advice he did volunteer was NOT to pay extra into my company pension plan, which I've since learned was very wrong and would have been far more tax efficient!!

So having been burned I'm trying to figure things out for myself. I've been reading thread after thread and am confusing myself more and beginning to panic about the fact I've still not made a decision with little time left in this ISA year, hence I thought I'd run the ideas past the obviously more experienced regulars in the forum.

I need simple, definitely not looking to choose how my money is invested myself as I wouldn't have a clue where to start. So I've looked at options like the Vanguard LifeStrategy fund on Vanguard Investor which I understand would have low fees. Given my lack of knowledge is this a sensible option?

I've also looked at Moneyfarm because my son linked me to an offer that said "Use the exclusive promotional code ‘ MTTM20K ‘ and you will get your first £20,000 managed free of charge for two years." I thought they seemed expensive in terms of charges, but if they genuinely are free for 2 years, is this a better option?

Having never started an ISA before, can you tell me, will I just get an account number a bit like a bank account and then use online banking or phone the bank to transfer the money into the ISA? Then is there some means of tracking how its doing occassionally?

Sorry if questions sound naive, hopefully someone won't mind offering some advice. If you need any other info to make sense of what I've said just let me know. Thanks.

Brynsam

Click on the black tab at the top of this page marked 'Banking and Saving' and do a bit of exploring - masses of helpful, impartial info on ISAs and all sorts of other things.

xylophone

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa?cmpgn=PS0617UKPABIS0001&gclid=EAIaIQobChMIs4Ce3cCN2gIVC53tCh3j0AriEAAYASAAEgJN5fD_BwE

http://monevator.com/using-vanguard-lifestrategy-funds-life/

above might be worth a read.

http://monevator.com/low-cost-index-trackers/

Also

http://www.hl.co.uk/

https://www.charles-stanley-direct.co.uk/Our_Services/ISA/

CatLady13

Snapdragon wrote: »

Having never started an ISA before, can you tell me, will I just get an account number a bit like a bank account and then use online banking or phone the bank to transfer the money into the ISA? Then is there some means of tracking how its doing occassionally?
.

I started my first S&S ISA a few months ago (with Cavendish), and I created an account - as simple as signing up on their website - and I deposit my money via debit card using their payment system. Once the money is there, I can choose to spend it on a fund or funds (or shares or whatever floats your boat but funds would be recommended). I can login at any time to see if my investments are up or down (down at the moment but that’s how it goes).

That’s my experience of it and it really is simple. I’d suggest that you just get your ISA open and the £20k deposited before the end of the tax year first. You’ll need to decide who to use for your ISA abd that depends on what fund(s) you’re looking to buy and the costs involved.

Snapdragon

Thanks xylophone, I had read the monevator article and I really related to his 'financial dyslexia’ statements. I know I'm not stupid, I paid off my mortgage and don't have any debt, I can save money no problem, I just don't have the confidence to know what to do with it! :eek:

His article and the number of positive mentions on the boards for the Vanguard product, were amongst the reasons I'd concluded Vanguards LifeStrategy route might be the right option for me.

Based on his thinking and my age (56) it seemed I'd need to look at the LifeStrategy 60% Equity Fund or LifeStrategy 40% Equity Fund. I still haven't figured out when he said split over two funds whether he meant have one ISA in 60% fund this year and a 2nd using the following years allowance in a 40% fund, or whether you can actually have one ISA but its split half in the LS60 & half in the LS40?

The vanguard site info seemed very generic and I was loathe to press the get started button in order to get more info, only to find I'd actually started something I didn't mean to.

xylophone

You open your ISA with your chosen provider and then choose your funds.

You could go with Vanguard (only Vanguard funds) or you might go with HL or CD or Cavendish etc and choose Vanguard funds or L&G funds or both or funds from other fund houses.

This article may be worth a look. https://www.moneywise.co.uk/investing/first-time-investor/easy-tracker-fund-portfolios-2018-and-beyond

ValiantSon

VLS are good funds and Vanguard Investor is the cheapest way to invest in them. You are only tied to their funds for one year at a time, as you can open a new ISA each year if you want to invest in something different. Vanguard also charge no exit fees if you decide to transfer out.

If you want a 50% equities allocation then you can buy £10,000 in VLS 60 and £10,000 in VLS 40 in the same year.

Moneyfarm are expensive. If you manage to avoid their fee you will still pay the ETF fee of 0.3% which would only be a 0.07% saving over Vanguard. Vanguard are a much longer established company with good financials.

BLB53

I need simple, definitely not looking to choose how my money is invested myself as I wouldn't have a clue where to start. So I've looked at options like the Vanguard LifeStrategy fund on Vanguard Investor which I understand would have low fees. Given my lack of knowledge is this a sensible option?

Yes, for a simple option, Lifestrategy are a good choice and the Vanguard platform is only 0.15% per year. I have recently opened my ISA for this year with them and bought the VLS 40 as I am now retired and looking for low volatility.

Suggest maybe get hold of 'DIY Simple Investing' by Edwards for a good introduction to passive investing which uses the VLS funds as a strategy.

enthusiasticsaver

I started investing in a Stocks and Shares ISA a few years ago and the two things you need to decide is which platform is right for you and what level of risk fund you wish to go for. Vanguard is a good choice as it is well diversified and already falls within certain levels of risk according to what type of investor you are. Put very simply the higher the level of equities to fixed term interest the more volatile the fund can be. I won't say risky as all investments carry risk but so does cash as it will not keep up with inflation. I use the Vanguard LS60 as the core of my portfolio both in my Stocks and Shares ISA and my SIPP.

I started with Cavendish which uses Fidelity platform and now use Halifax Share dealing which I prefer as it has a flat fee (£12.50 per year) and our portfolio is now bigger so that works for us. Whether it works for you depends on how much you intend investing. You can see the account online and transfer into the ISA using a debit card and transfer out the same way and see the valuation any time and how it is performing. I like that. You can set it up online but they need to send you a letter with online access although if you already use Halifax you may not need to do that. If you intend investing before the end of this tax year I would do that quite quickly now.

I personally have not used an IFA as I started small and gradually moved more and more cash isas over to stocks and shares. We had a bad experience with an IFA just before my husband retired where if we had taken his advice we would be in deep trouble as he worked his figures out based on wrong pension valuation. I am sure there are good ones but I don't feel we need to use one now.

Snapdragon

ValiantSon wrote: »

VLS are good funds and Vanguard Investor is the cheapest way to invest in them. You are only tied to their funds for one year at a time, as you can open a new ISA each year if you want to invest in something different. Vanguard also charge no exit fees if you decide to transfer out.

If you want a 50% equities allocation then you can buy £10,000 in VLS 60 and £10,000 in VLS 40 in the same year.

Moneyfarm are expensive. If you manage to avoid their fee you will still pay the ETF fee of 0.3% which would only be a 0.07% saving over Vanguard. Vanguard are a much longer established company with good financials.

Thanks so much, that's really given me a bit of confidence that I was on the right track and that Vanguard was probably a better option than moneyfarm despite the supposed offer.

I think I'll dip my toe in, by opening the Vanguard Isa for this tax year and then figure out if I should do anything else for the new tax year.

I've only just increased my salary sacrifice substantially to reduce my tax bill and get more in my company pension pot, however still not convinced whether I've opted for enough or could opt for more.

I'm not sure how the tax relief on your annual pension contributions work and how the statement "you’ll normally only get tax relief on £40,000. However, you can carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years." applies to me.

Does that apply to salary sacrifice? I know I haven't salary sacrificed anywhere near £40,000 a year in the past 3 years, but does that mean I can salary sacrifice substantially more than £40,000 this year avoiding paying 40% tax etc

Could I for example salary sacrifice 80% (company says there is no maximum just be aware of the governments annual allowance rules) to really boost the pension pot and live off the cash I've got in the bank rather than put it into another isa?

Any clarification anyone could provide would be appreciated.

NoMore

I would break that last question out about pension contributions and post it on the pensions board, you will get more eyes on it than being stuck in a thread titled ISA for a newbie.