New ISA for current tax year

Robie

Hi

These are probably the most stupid questions but here goes.

My wife has an ISA with IWeb and *hasn't* contributed to it yet this year. This is thinking of investing in Vanguard. So, is it better to invest directly with Vanguard (since their charges are low) or buy/sell Vanguard thru IWeb?

Also, if investing with Vanguard, is it okay to buy/sell funds/ITs from her current ISA with IWeb?

Thanks
Robie

talexuser

If you are already with iWeb then Vanguard will be more expensive with a 0.15% platform fee for the ISA, whereas iWeb don't have a platform fee at the moment. Whichever fund you buy should have the same low fund fee.

Dividend reinvestment might be a factor, iWeb is £5 a trade, whereas Vanguard has free dealing, so which is better depends on the total amount invested and if the Vanguard platform is more than £20 a year assuming you only reinvest 4 times a year in iWeb - if your strategy is to buy and hold.

Robie

talexuser wrote: »

If you are already with iWeb then Vanguard will be more expensive with a 0.15% platform fee for the ISA, whereas iWeb don't have a platform fee at the moment. Whichever fund you buy should have the same low fund fee.

Dividend reinvestment might be a factor, iWeb is £5 a trade, whereas Vanguard has free dealing, so which is better depends on the total amount invested and if the Vanguard platform is more than £20 a year assuming you only reinvest 4 times a year in iWeb - if your strategy is to buy and hold.

Thanks for quick response. So let me get this right in my mind.

Say she invests full 20k in Vanguard then her charge is .15% platform fee (i.e. £30) and *no* charges for reinvestments.

With IWeb, if she reinvests (which I think she does) then I am sure she pays more than £30 over the year. So, another question: Should she hold on to the dividends (say for a year) and then invest it with the next year ISA? Doesn't this also mean that she would lose out on the compound value of her investments.

Sorry, these may be basic questions but I want to make sure she is absolutely sure before moving to Vanguard.

Robie

Lokolo

What are her investments?

Vanguard offer funds, which makes me think the investments are therefore funds. If these funds are paying income, then switch to the ACC equivalent.

xylophone

Can't she simply use acc Vanguard funds?

JohnRo

Robie wrote: »

..Should she hold on to the dividends (say for a year) and then invest it with the next year ISA? Doesn't this also mean that she would lose out on the compound value of her investments.

That's what I would do, the dividends can earn some interest while they sit in a bank account waiting to be deployed in the next tax year. The downside is that there might be a tempation to spend them.

The 'compound value' you've mentioned will be a factor, especially in a really good year for markets but it largely depends on the level of the dividend payout, the timing of the payouts and how that relates to the performance profile of the investment within the year.

It's not worth getting hung up about over a one year period imo, it could even result in a net gain if it's a particularly bad year for stock markets.

Better just to keep the costs as low as possible and look to the longer term.

Robie

Lokolo wrote: »

What are her investments?

Vanguard offer funds, which makes me think the investments are therefore funds. If these funds are paying income, then switch to the ACC equivalent.

Xylophone wrote:

Can't she simply use acc Vanguard funds?

Thanks for quick reponses. I am not sure what kind of fund she holds but would ACC type funds also incur costs thru divident investments?

Robie

JohnRo wrote: »

That's what I would do, the dividends can earn some interest while they sit in a bank account waiting to be deployed in the next tax year. The downside is that there might be a tempation to spend them.

The 'compound value' you've mentioned will be a factor, especially in a really good year for markets but it largely depends on the level of the dividend payout, the timing of the payouts and how that relates to the performance profile of the investment within the year.

It's not worth getting hung up about over a one year period imo, it could even result in a net gain if it's a particularly bad year for stock markets.

Better just to keep the costs as low as possible and look to the longer term.

Thanks.

That seems like a really good option to me too. Get the dividends and then re-invest next year.

Perhaps, having ACC funds is the answer.

JohnRo

The problem with iWeb is that their ISA isn't flexible, if the plan is to use the full £20K allowance plus all the dividends from the previous year then it simply won't be possible with them.

I'm stuck in an IT/ETF mindset, an ACC fund is the way to go at iWeb.

Lokolo

Robie wrote: »

Thanks for quick reponses. I am not sure what kind of fund she holds but would ACC type funds also incur costs thru divident investments?

No reinvestment done via the platform so no cost.

Robie

Lokolo wrote: »

No reinvestment done via the platform so no cost.

Thank you very much Lokolo so will see what she holds and how to change to ACC if INC funds. :T