Difference between Blackrock funds

toothdoctor

Hi all
Apologies if this has been asked in the past but just need to clear something up regarding he blackrock consensus funds via HL. For example the Blackrock consensus 100 has 2 versions- class A and Class 1. What is the difference between the two? Both have different initial on going charges but due to the discount HL apply the final net on going charge is the same. It says the unit type is inclusive in class A and unbundled in Class I with class A giving a lower historic yield than the class 1. Both seem to invest in the same thing so I don't understand why there is a difference. If you were to chose one would it be the class A or Class 1 version? Thanks

Alexland

The HL fund discount is provided as a regular cash refund from BlackRock into your loyalty account which reinvests when it reaches £10. On £10k LISAs we get about £1 per month refunded from BlackRock compared to the circa £4 per month in HL platform fees.

Class I is supposed to be the HL exclusive discounted version but maybe BlackRock might also provide HL customers with a discount (but bigger as the OCF is bigger) to get the fees down to the same level on the Class A too - for people who have bought the wrong one. I wonder if you placed an order for Class A if they would just give you Class I units anyway.

Alex

ColdIron

The class A fund uses the old charging model where there was a higher OCF and some of this was handed back to HL (or whoever) as a commission. HL call these classes 'inclusive'. Kickbacks like these are now outlawed but but because many people may have already held the old class it still exists but HL will pass this commission back to you as cash. The Class I or unbundled fund does not have commission in the OCF. Note this has nothing to do with the loyalty bonus which HL have negotiated with BlackRock and applies to both classes

You want the newer Class I fund as the old one is being deprecated

toothdoctor

Thanks both that is a great help. Like alexland I am considering buying this fund for my LISA (last years is in skipton as cash but don't want to save in anymore cash as this money will supplement retirement and will likely be ravaged by inflation) Was wondering if it was worth investing in the 100 fund for a few years then switching to the 85, 60 versions as I near 50 (I'm 38) or if it is best to just invest in the 85 version until 50. Likely will also hold vanguard lifestrategy funds in s&s Isa but on the vanguard platform due to lower platform fees.
Once again thanks

Alexland

If you have a Cash LISA from last tax year then be aware HL do not support inbound LISA transfers anymore (too hard and difficult) so you might want to also consider AJ Bell YouInvest although they don't have discounted funds and their £1.50 fund trade fees can be expensive if you regularly contribute. Still their percentage fee is lower.

In terms of derisking you could do it gradually or only in the last 5-7 years. At age 60 you might choose to keep the money invested longer anyway. As such the strategy should be aligned to the likely withdrawal date.

I intend to recycle some of the money into my younger wife's pension for circa 20 years from when I am 60 until she is 75 and give the rest to our children for house deposits, etc in their 20s.

Alex

toothdoctor

Thanks for that. I am aware that HL don't accept transfers (which I think is ridiculous for a market leading platform) however I do plan to invest regularly so the dealing charge of aj bell would outstrip the platform fee saving. Plus I don't like the way aj bell collect the fees, I would much prefer it if they could just charge it to my debit card rather that take it from my LISA instead (at least with hl you have a separate account for fee taking) Couldn't I just open hl LISA for this years and subsequent years subscriptions and open an aj bell LISA just to transfer previous years LISA. I am sure the rules allow this provided it is opened before my 40th birthday as the aj bell LISA won't receive any new contributions, just previous years.
Thanks again

Alexland

I do wonder if having two S&S LISA providers and then logging into HL at exactly the right point in the month to pay the fees on debit card might be a bit extreme. HL do let you pay from a Fund & Share account but that has it's own eventual closure fee too. I just pay from the LISA cash balance as it's less money tied-up until 60 that way. As the amount you have in LISAs increases the £1.50 YouInvest fees become a less significant proportion of your overall platform costs. Even with a dormant YouInvest account you would incur occasional £1.50 fees to sell down units to cash to pay the fees.

If I had a Cash LISA to transfer and was using the full £4k allowance in high volatility 100% equities each year then I would go with YouInvest and invest in something like the HSBC FTSE All World fund at 0.16%.

Assuming you invested the bonus at the same time as the next month's contribution (so 12 not 24 trades a year) then on £10k that would cost £25 platform, £18 trade and £16 fund fees per year = 0.59%. For £15k that would be £37.5 platform, £18 trade and £24 fund fees per year = 0.53%. For £20k that would be £50 platform, £18 trade and £32 fund fees = 0.50%. After that it's probably worth switching a lump to an ETF to reduce platform costs.

I am only avoiding AJB for the LISA as they administer my Halifax SD SIPP which is already well above the £85k FSCS limit. I have previously had an account with YouInvest and the service was as good as HL.

Alex

toothdoctor

So just to get this correct in my head about aj bell charges. I pay £4000 in as a lump sum in blackrock fund with an going charge of 0.22% (i assume I will have the option to hold part of this as cash to pay fees). So I will pay £1.50 to do this. Then the government bonus of £1000 will attract another dealing charge of £1.50. Also the platform fee would be 0.25% of 5000 plus the fund fee (0.22% of 5000) making a total approx. Annual charge of £26.50. So I would need to assure that I have at least this amount as cash in the account. Obviously I haven't accounted for any gains or losses in this calculation. Hl would just be 0.54% of 5000=£27 annually regardless of how many trades are made. As you said the dealing fee becomes less significant as the pot increases (also plan to fill my wife Lisa up as well so will have 10000 per year). Wanted to invest regularly to take advantage of pound cost averaging. Aj bell is tempting due to the ability to transfer. Was thinking of the target date funds from vanguard as has similar ongoing charge as blackrock on aj. Will definitely have a look at that HSBC fund you suggested. Thanks for you input I really appreciate the view of people who are far more experienced in this investment world

Alexland

Yes with YouInvest (or HL if you intend to pay the fees from the LISA cash balance) you would invest slightly less than £4k and again less than £1k bonus such that there remained sufficient cash in the LISA account to pay the likely fees (leaving a bit more to cover likely investment growth) until you can next contribute in early April.

As such for a lump sum YouInvestor who gets their calculations correct they would only pay 2x£1.50 per tax year in trade fees. I guess they could delay and do it all in one trade after the bonus was added but would be missing investment growth (or losses) while the cash is in the account.

HL would be 0.56% (0.45% plus 0.11%) regardless of how many fund trades you do.

Over the long term even investing annually every April would give you some pound cost averaging.

Target date funds such as VTR2040 are good if you intend to withdraw the money in one go however if you are going to use this for retirement then you might want to keep it invested for longer and go into a drawdown on it in which case it might reduce risk too much by age 60.

p.s. on above post above you mean VLS on YouInvest at 0.22% not Blackrock? The fund fee is taken from within the fund (outside your visibility or control) but the platform and trade fees are taken from within the account cash balance.

Alex

toothdoctor

Thanks Alexland. With regard to the 0.22% I did indeed mean blackrock consensus 85 and not VLS as I looked on the aj bell website and it says the ongoing charge is 0.22% (as is the VLS). I assumed that I would need to pay this out of the cash balance of the Lisa so 0.25% platform fee + 0.22% fund fee +trading charges ( so on say 10k this would be £47 + trading fees) Are you saying that I don't physically pay the fund fee directly so I would pay £25 + trading fees annually and the fund fee of 0.22% is taken out of the fund itself. Thanks for the info on Target date funds from vanguard. May invest my wifes in that so that we can take that at 60 and keep mine invested. We both get a DB pension which we can take part at 60 so the LISA will be a bit extra on the side (don't want to pass up the free 1k bonus). Put a lot in the pension so don't want to breach annual allowance or LTA and pay a large tax bill. Thanks

Alexland

Hmmm.. Consensus 100 Class D is showing as 0.24 on the Blackrock website.

Yes you do not pay the fund manager fee directly it is removed from within the fund.

My basic maths if if I am late 30s and my wife is early 30s then if we can each contribute the full amount until age 50 and achieve 2.5% annual growth above fees and inflation until age 60 that should give us pots of £100k and £150k in today's spending power. Of that nearly £60k (20 years of £2880) would be recycled into my wife's pension (for slight tax benefit, as I might also hit LTA) leaving over £190k to help the kids with weddings, house deposits, etc. Might also be enough to buy a new car and a few holidays.

We pay enough into the pension to get to basic rate and full child benefit.

Alex