Accumulation and income funds

Grenage

About six years ago I had a few grand in the bank, so I threw it into an investment ISA. I didn't really know what I was doing, so I picked one that was doing alright (Liontrust Special Situations UK). To be fair, it's performed ok.


I've since started putting some into a investment ISA every month, and I noticed that the old Liontrust fund is an (Inc) fund.


I've never received any payouts from the investment, it's just gradually increased in size from £4900 to £8050.


So do Income funds work differently when they're in ISA wrappers? I considered cashing it in and moving across to their Acc fund.

ColdIron

It depends on what instructions you've given your platform. If you'd asked for them to be paid to you then that's what would have happened. You could have asked for them to be reinvested in the fund automatically (as opposed to retained within the fund as Acc units would be). Or the dividends could be sitting in your associated cash account. This fund only pays dividends once a year so check your statements. The recent payment dates have been 31/07 so check around then. ISA makes no difference

Grenage

That makes sense, thank you; I don't see anything coming out and going back in on the reports.


If I've no plans on touching it; is it worth cashing out of the Inc and into the Acc?

ColdIron

If you are holding the fund for the long term it might make sense, saves you the agg of tracking them and doing something with them. Quite a few platforms charge for automatic reinvestment and that would be a very good reason to swap to Acc. A counter argument might be to use the dividends to pay platform fees (you don't say which one). Another could be that if you had several funds you could choose which one(s) should benefit from the dividends to aid rebalancing etc. It really depends on what your plan is

Grenage

Thank you, I think I will cash out and back in. I'm using Fidelity's platform, which I entered through Cavendish.


I'm pretty hands off so I tend to just decide on a fund and see how it goes; I rarely move things around very much.

dividendhero

I'm glad to be a holder of Liontrust special situations too, but worth pointing out it's yield is less than 1% so not a huge difference between inc & acc funds

dunstonh

I nearly always buy inc units instead of acc. It doesnt matter. Indeed, some funds only have inc units and some only have acc units.

Fidelity dont charge for reinvestment of distributions.

jamesd

Unless you want the income it makes no difference inside an ISA or pension.

Outside, it's more hassle to track the reinvesting into accumulation units so you can report correctly to HMRC. Income units make life easier because you'll get easy to use income payment transactions.

Distributions - payments - from a fund can be either interest or dividends. Usually interest from bonds, dividends from equity. The fund details specify. Outside an ISA or pension this determines which of your allowances applies.

Grenage

Ah ace, thanks chaps. With no reinvestment cost I might as well just leave it as it is.

Every day is a school day!

aroominyork

dunstonh wrote: »

I nearly always buy inc units instead of acc. It doesnt matter. Indeed, some funds only have inc units and some only have acc units.

If your clients don't want to draw the income, why do you do that?

dunstonh

aroominyork wrote: »

If your clients don't want to draw the income, why do you do that?

It keeps the cash account floated and any excess is reinvested into the funds where there is an allocation shortfall. Not the same fund that generated the income.

Plus, most have multiple wrappers including unwrapped and income units are much easier to monitor for CGT.