Have I got this right? First time with S&S ISA

Otispunkmeyer

Alexland wrote: »

Yes if contributing monthly then Halifax Share Dealing at £12.50 pa + £2 per regular trade is a cheaper fixed price S&S ISA than iWeb. Still for now with only £5k and growing you would be better with Vanguard Investor percentage fee model until you get to around £25k.

If you don't need access to this money until retirement then consider additional pension or lifetime ISA (if under 40) contributions as they may be more advantageous.

Alex

LISA you can have in addition yes? And only 4K PA? If so I might be able to put money that way as well. Though I do like the idea of a SIPP more for some reason....I guess I am a little wary of stuff the government were involved with :eek:

Though do you not need a decent sum to start a SIPP or can you start from £0?

And a final, maybe unrelated Q, my only other outstanding loan besides mortgage, is my student loan. It’s on the old style, though I had maybe £10k loaned and then it never got repaid for 4 years whilst I was doing a PhD. I don’t know the exact amount outstanding due to the way they do their accounts, but there’s about 7k left to pay and I think the interest is 1%. Obviously, this is being repaid before tax, which is good...I think I am right in saying it would effectively cost me more to pay it back out of taxed income? Or would interest > tax in the end?

I mean I could pay it off right now. Then I could still start an ISA, but from zero.

Alexland

Yes you can contribute to both a S&S LISA and a S&S ISA in the same tax year so you could for example add £4k to the S&S LISA and £16k to a S&S ISA to use your £20k overall ISA allowance (and have £21k invested with the £1k LISA bonus).

The government is involved in setting the rules for all ISAs and pensions. Depending on the provider there is usually a very low minimum to start any of these accounts. The main advantage for a basic rate taxpayer of a LISA over a SIPP is that it's the same 25% bonus / 20% tax relief but there would be no risk of paying tax on the withdrawal from a LISA at age 60. If you are higher rate then making higher pension contributions win almost every time.

I am not an expert on student loans but my understanding is that they are calculated against your pre-tax income but deducted after tax. If your loan is only 1% there seems little point paying that back early as you could easily get a better rate from cash savings and your investments (especially with a LISA bonus) are more likely to generate a higher return over the long term after all the ups and downs.

Alex