S&S ISA transfer and general advice.

Rawhy

Hi All,


First of all, thank you all for giving me advice and detailed posts for my previous two threads asking questions about funds. I have a much better idea of what I want to do now, and just have some final questions before I take the plunge.

Quick recap:

1. I can invest 15-20k per year (so it'll be in an ISA), over the course of 20-30 years. The amount I invest will most likely increase as my salary increases. I am already contributing the max amount for company pension matching (10% of my salary, matched by 10%, so that's 20% ).
2. My aim: Just to make my money work harder than being in a savings account. I recently landed a high paying job, but I grew up very poor, so I'm used to being very frugal. I have no family to take care of and no debts. Perhaps I'll throw a massive party when I'm 60, with cocaine and hookers.
3. Investment style: Passive, I just want to invest and forget. Also, I want to keep it low cost and simple. Just one fund, I'm hoping that over the course of 25-30 years or so, 100% equity will perform better than a combination of bonds and equity.
4. I am new to funds, although I do own a few individual shares.

Initially, I was going to go with Vanguard as a platform, with their "Vanguard FTSE Global All Cap Index Fund". Then I read this: https://moneytothemasses.com/saving-for-your-future/investing/vanguard-investor-uk-review-is-it-the-best-in-the-market

Which says that I should go with interactive investor if I have over £60k.

So my revised plan is this: Go with Vanguard's platform until I have 60-70k, then transfer my ISA.

My questions:

1. For ii, if I am investing a regular amount each month, that's only £1 per fund, right? The £10 is only to buy into new funds or to sell. Otherwise, since I only get 2 free trades per quarter, it becomes a bit limiting if I want to (re-)invest monthly in the same fund.
2. Vanguard charge no exit fees. Does this mean I can transfer my ISA from Vanguard to ii without any penalty? - Are there other hidden charges?
3. Are there other things I should consider before taking the plunge? For example, you might tell me that transferring ISAs is too much trouble if I'm planning to do it after 3-4 years, then I should go with ii to begin with, or you might suggest that Hargreaves Lansdown might be better suited for my needs.

Thank you all

Albermarle

ikely increase as my salary increases. I am already contributing the max amount for company pension matching (10% of my salary, matched by 10%, so that's 20% ).

I think most posters on here would normally wonder why you are filling up on ISA's and not putting more in your pension. Especially if your salary is increasing and you pay more tax at 40% .
Normally with a workplace pension you can add more as seperate lump sums direct to the pension provider. If for some reason that is not possible , you can just open a seperate new pension yourself .
Only caveat is that you can not add unlimted sums to a pension but normally a lot more than 20% of salary , unless you a VERY high earner.

Rawhy

Albermarle wrote: »

I think most posters on here would normally wonder why you are filling up on ISA's and not putting more in your pension. Especially if your salary is increasing and you pay more tax at 40% .
Normally with a workplace pension you can add more as seperate lump sums direct to the pension provider. If for some reason that is not possible , you can just open a seperate new pension yourself .
Only caveat is that you can not add unlimted sums to a pension but normally a lot more than 20% of salary , unless you a VERY high earner.

Because I might want this money before I'm 50.

Kendall80

Rawhy wrote: »

1. My aim: Just to make my money work harder than being in a savings account. I recently landed a high paying job, but I grew up very poor, so I'm used to being very frugal. I have no family to take care of and no debts. Perhaps I'll throw a massive party when I'm 60, with cocaine and hookers.

Thank you all

Probably best to lay off the former

Linton

Rawhy wrote: »

Because I might want this money before I'm 50.

All of it?

Rawhy

Linton wrote: »

All of it?

Well, no. I'll probably want to start using some before I'm 50. I know that I can take 25% of my pension out at 55, but an ISA just seems more flexible. I'll consider putting more in my work pension however....

My work pension provider is Fidelity. They seem to have made specail funds for my company (or most likely, just re-branded some funds with my company name on it). I might leave this job after 3-5 years (this is common for people in the hi-tech sector), and I might change jobs every couple of years. I don't want a large sum of money being tramsferred every couple of years. I'd like something which won't change when ever I change jobs. Perhaps I'll look into a private pension....

I'll read up on why I should prefer pension over ISA (since I guess this is what you guys/girls are getting at )

londoninvestor

Rawhy wrote: »

My questions:

1. For ii, if I am investing a regular amount each month, that's only £1 per fund, right? The £10 is only to buy into new funds or to sell. Otherwise, since I only get 2 free trades per quarter, it becomes a bit limiting if I want to (re-)invest monthly in the same fund.

Correct, and in fact it's a bit more favourable than you think. You can also use the "regular investment" to invest into a new fund that you don't already hold. You can also use it for one-off purchases (provided you don't mind buying on a specific day of the month) - just cancel the regular investment instruction after the first purchase.

londoninvestor

By the way, Halifax and Lloyds have lower annual charges than II, and no percentage charge, and might suit you better than II.

Halifax is £12.50 per year, £2 for a purchase done as a regular investment, and £12.50 for sales and other purchases.

Lloyds is £40 per year, and £1.50 per trade for all fund trades (including sells and non-regular buys).

Although it's probably not worth too much overanalysis when asking "what platform should I transfer into in 3 or 4 years' time" - pricing might have changed by then!

Rawhy

londoninvestor wrote: »

By the way, Halifax and Lloyds have lower annual charges than II, and no percentage charge, and might suit you better than II.

Halifax is £12.50 per year, £2 for a purchase done as a regular investment, and £12.50 for sales and other purchases.

Thanks! I've just taken a look at Halifax, and they list a 0.5 transaction fee:
https://www.investments.halifax.co.uk/funds-centre/fund-supermarket/GB00BD3RZ582
So I'm guessing that's on top of the £2 per regular investment?

One more thing, on the charges section: https://www.halifax.co.uk/sharedealing/charges/
The transfer out to another provider is "£25 per stock (max £125.00)", does one fund count as one "stock"?

I noticed that to reinvest dividends cost 2% of dividends, up to a max of £12.50... hmmm, how can I find out how often is dividends paid out of this fund: http://doc.morningstar.com/Document/46eb8a0ba2e4e00d3784132b742c3c1d.msdoc/?clientid=lloydsbankinggroup&key=d6d11015901145a0&optoutmulti=0:0|c1:1|c3:0|c5:0|c4:0|c2:0&optmessage=1 I tried search a few places but found nothing.

Thank you do much!

londoninvestor

Rawhy wrote: »

Thanks! I've just taken a look at Halifax, and they list a 0.5 transaction fee:
https://www.investments.halifax.co.uk/funds-centre/fund-supermarket/GB00BD3RZ582
So I'm guessing that's on top of the £2 per regular investment?

No - that's an estimate of the charges that the fund incurs as a result of buying and selling the shares in its portfolio. It's not a direct cash charge to you (of course, it impacts the eventual return of the fund). It's the same whichever platform you hold the fund through.

MIFID II requires brokers to provide an estimate of this charge. Many (like Halifax) have taken the approach of estimating 0.5% for all funds - the actual number will depend on the fund, but not on the platform.

Rawhy wrote: »

One more thing, on the charges section: https://www.halifax.co.uk/sharedealing/charges/
The transfer out to another provider is "£25 per stock (max £125.00)", does one fund count as one "stock"?

Yes.

Rawhy wrote: »

I noticed that to reinvest dividends cost 2% of dividends, up to a max of £12.50... hmmm, how can I find out how often is dividends paid out of this fund: http://doc.morningstar.com/Document/46eb8a0ba2e4e00d3784132b742c3c1d.msdoc/?clientid=lloydsbankinggroup&key=d6d11015901145a0&optoutmulti=0:0|c1:1|c3:0|c5:0|c4:0|c2:0&optmessage=1 I tried search a few places but found nothing.

Note that KIID states: "Income from the Fund will be reinvested and reflected in the price of shares in the Fund."

i.e. the income is not paid to you as cash which you need to pay Halifax to reinvest - Vanguard does it for you as part of the operation of the fund, with no separate charge for doing so.

Most funds come in two different share classes - Accumulation (like this) and Income (which pays you the dividend as cash). Note that this one is Accumulation (see the top right of the KIID).

Rawhy

londoninvestor wrote: »

No - that's an estimate of the charges that the fund incurs as a result of buying and selling the shares in its portfolio. It's not a direct cash charge to you (of course, it impacts the eventual return of the fund). It's the same whichever platform you hold the fund through.

MIFID II requires brokers to provide an estimate of this charge. Many (like Halifax) have taken the approach of estimating 0.5% for all funds - the actual number will depend on the fund, but not on the platform.

Hmm, if you look at the example on page 4 of https://static.halifax.co.uk/assets/pdf/filestore/CostAndCharges.pdf , for "Farouk the Fund Fan", they've added the 0.5% transaction cost to the total charges.

So let's say, I make regular investments of £1000 per month, over the course of a year, the transaction cost is £12000*0.005 = £60. The reduced dealing commision is £2*12 = £24, and the annual ISA administration charge is £12.50, in total the fees would be £96.50.

If I invest the full ISA amount of £20k, the fees would increase to 20000*0.005+24+12.50=136.50. I don't see this transaction fee mentioned anywhere for the Vanguard FTSE All Cap Index Fund in II or Vanguard (actually, Vanguard specifically listed it as 0%: https://www.vanguardinvestor.co.uk/content/documents/legal/vanguard-full-fund-costs-and-charges-2018.pdf ).

Going by those numbers, I think I'll go with II since it is marginally better. Please correct me if I'm wrong.