Spreadbetting account with Ayondo as a pseudo ISA

tin586

Having maxed out my stocks and shares ISA allowance I’m looking for a cheap and tax-efficient way of ‘buying’ more shares in companies I already hold in my ISA. I’ve looked at spreadbetting as an option.

I’m not interested in leverage/using margin and a spread betting account with Ayondo seems to offer a route, as it seems one can take fully funded (no margin) positions and thus there are no overnight funding costs.

Given the low interest rate environment, it seems to me that there is no benefit in using margin, because what I might be able to earn in keeping the cash on deposit (and only using it to meet margin calls) would be outweighed by the overnight funding costs on the spreadbet.

I would be looking at medium-long term buy and hold, as opposed to day trading, and thinking of doing it with ETFs as well as individual company shares.

Of course, there would be wider spreads in using the spread bet option as opposed to buying the shares in a normal broking account, but on the other hand there would be no stamp duty or dealing commission.

Can anyone see any disadvantages in using a spreadbetting account with Ayondo like this (fully funded) as a pseudo ISA?
If you use spreadbetting (with margin) as a top-up to a maxed out ISA can you share experience/views on the impact of spreads and funding costs?

(Polite request that this thread be kept on topic without general comments about the evils of spreadbetting and it being crazy gambling etc.)

Thank you.

DrSyn

Have you read the notice at the bottom of the Ayondo own web page?

75.9% of retail investor accounts lose money when trading CFDs and spread bets with this provider.

You should consider whether you can afford to take the high risk of losing your money

AnotherJoe

TBF to the OP, this isnt classic spreadbetting though, no doubt 99% of those 75.9% are effectively daytrading or similar. This is buy and hold.
However, to the OP, since you are not looking at margin, is the difference in returns big enough that you can't just buy in a standard share trading account? Are you expecting CGT so large it cant be dealt with by selling enough to use up the CGT limit each year?
Also, are you married or witha long term partner you trust? Because if so you can effectively bed and breakfast to use up CGT as well.

Alexland

In this situation I would just use a general investment account (or maybe additional pension contributions) with a reputable platform.

masonic

Have you done a worked example where you add up all of the costs of opening a position, keeping it open over the timescale you envisage, then closing the position vs the costs of buying an ETF though a discount broker such as XO and costs of periodically switching to a different ETF in the same sector to utilise CGT allowances?

System

Theoretically, what you suggest is equivalent to holding shares with the benefits of avoiding stamp duty and capital gains tax. However, stamp duty can be avoided by buying ETF, and CGT can usually be avoided by making full use of the annual allowance. My question would be what do you actually own when you do this by spreadbetting? An investor who holds ETF or shares with a broker/platform would be the beneficial owner of the shares held in a nominee account. With spreadbetting, you would own a bet and would be a creditor of the firm if it became bankrupt.

DrSyn

When you invest in a company,then buy & hold
(a) You own a part of that company
(b) You will get dividends from that company
(c) There will be either a capital gain/loss as the share price goes up/down.

Spread betting is a derivative product. With a spread bet you don’t actually own the asset and there will be no dividends. It is just a bet.

So ISA, real or pseudo has nothing do with it.

If the OP really wants to buy & hold outside of an ISA they can do it via a general investment account or maybe via a pension.

If the OP wants to bet there is the bookies.

seacaitch

tin586 wrote: »

Can anyone see any disadvantages in using a spreadbetting account ... (fully funded) as a pseudo ISA?

Yes, most definitely.

You need to think about what can go wrong. Your relationship with any spreadbetting bucket shop is very different from that with a conventional broker, as is the mechanism by which your trades are "executed" (on exchange vs. virtually).

The implications of this are that you don't enjoy the same protections as with a conventional broker and that yours and the bucket shop's interests are almost diametrically opposed. At critical moments, both of these can become massive issues which could be ruinous to you.

Alexland wrote: »

In this situation I would just use a general investment account (or maybe additional pension contributions) with a reputable platform.

This is the solution.

System

DrSyn wrote: »

When you invest in a company,then buy & hold
(a) You own a part of that company
(b) You will get dividends from that company
(c) There will be either a capital gain/loss as the share price goes up/down.

Spread betting is a derivative product. With a spread bet you don’t actually own the asset and there will be no dividends. It is just a bet.

So ISA, real or pseudo has nothing do with it.

If the OP really wants to buy & hold outside of an ISA they can do it via a general investment account or maybe via a pension.

If the OP wants to bet there is the bookies.

You are wrong about dividends:
"Dividends
If a company you have shares in decides to distribute part of its profits to its shareholders, you will be included. Depending on the direction of your position, you will either receive the payment or need to pay. Read more about dividends in the Learn / Spread betting section under Corporate Actions."
https://www.ayondo.com/en/markets/spread-betting/shares

tin586

A general broking account is something I’m also looking at. I guess I should have mentioned for completeness, but as I didn’t have any questions on that, I didn’t.

I don’t anticipate hitting the CGT allowance (which is in any case manageable year to year). Dividend allowance seems stingy, but that’s the rules!

SIPP option I ruled out, because I’m on track with a (defined benefit) pension and could trip the annual allowance in the coming years just with that.

I haven’t properly done the numbers on this option v the normal broking option as I don’t have visibility on Ayondo’s spreads for the stocks I am interested in (which I recognise can change from time to time). I suppose I could see if opening a ‘demo account’ lets me see.

Regarding Ayonodo default/bankruptcy risk, I would ensure my funds with them were within the FSCS limit.

Thanks for the helpful comments.

Alexland

Ayonodo claim to have insurance to cover client money up to £1m

https://www.ayondo.com/en/social/security/free-insurance

However even if the fees are a little bit higher with a reputable general investment account they should still be fairly low (iWeb, etc) so actually owning the assets in a proper nominee account is IMHO worth paying a bit extra for.