Investing for beginners - Stocks and Shares Isa

YellowStarling

Alexland said:

To celebrate the start of a new tax year today my wife and I just opened L&G S&S ISAs to get a total of £213 TopCashBack. We have gone with the £500 lump sum then £100 per month profile. Once the cashback goes payable we will stop paying the £100 per month but ensure the accounts have the required minimum £2,500 of contributions (over the 24 months) before the end of this tax year. Next tax year we will probably make our S&S ISA contributions elsewhere if another provider has a good signup offer. Then just after the minimum 24 months offer clawback period, transfer the L&G ISAs into our larger iWeb ISAs.

Next job is to start filling up our S&S LISAs...

You're a couple after my own heart and, as such, I explored this too (with the added Quidco £20) for me as a sole ISA (therefore just one £125 for 24 months).  But, opening this S&S ISA of 50 fund-choice, £125 doesn't seem to be a large enough amount to tempt me to "tie up" my 2020/21 allowance with L&G when I could get a selection from 3,000+ funds in my current or alternative (sign-up offer-less) providers. 

Assuming I had the full £16,000 to invest this year (after £4,000 in LISA), the £125 represents only 0.4% guaranteed return over the 24 months on that £16,000 in payment for restricting my fund choices for a year (and having to leave at least £2,500 of it in for a second year).  In other words, by opening the L&G S&S ISA I am confirming that a wider fund choice could not beat a 0.8% annual handicap over two years.

As that two-year 0.4% return could be increased by moving £13,500 of the £16,000 in year 2, I'll use a simpler illustration: investing £2,500 in L&G this year to get the £125 at the end of year 2 is a decent (and 'guaranteed') return of 2.5% over two years, before fund growth itself.  But then in what/where would I be investing the remaining £13,500 of my allowance this year?  Given contribution rules, it would either the same L&G up to £16,000 (see above), a cash ISA (no, thanks) or a P2P ISA (absolutely no, thanks).

In summary, I am wrestling with whether £125 is worth committing my S&S allowance to L&G this year, and leaving £2,500 of that in there for year 2, instead of attempting to benefit from a wider fund selection in my present or alternative S&S ISA provider.

So I am interested if fund choice is/was a factor in your decision?  Apologies if you cannot answer this, or prefer not to, as it may reveal sensitive information re: the amounts you have to invest this year, but I'm genuinely interested to know if my assessment above is correct or if I'm missing something.

(Final note: for ease of illustration, I have excluded differences in platform charges, etc. though these may well (should?) be a factor in calculations).

Alexland

YellowStarling said:

In summary, I am wrestling with whether £125 is worth committing my S&S allowance to L&G this year, and leaving £2,500 of that in there for year 2, instead of attempting to benefit from a wider fund selection in my present or alternative S&S ISA provider.

Although you might prefer a choice of thousands of funds at the end of the day most people only invest in a small number and the L&G funds are a good selection of high quality funds although the all-in fees for these classes which include the ISA wrapper are more than I would normally pay in fund+platform fees. These cashback deals are only really worthwhile if you stick around the minimum commitment so if you intend to contribute the full £16k into this S&S ISA then it might not be worthwhile.

There is a trick were you could contribute anything above the £4k LISA and £2.5k S&S ISA into a Cash ISA before the end of this tax year and then transfer it to a cheaper S&S ISA at the start of the next tax year however then you would have missed any returns that would have come from investing it earlier. It really depends on the profile of when your investable money becomes available. We are unlikely to use our full ISA allowances this tax year as we already make very high sal sac pension contributions and I would like to get the kids JISAs matching which is going to be expensive and make use of the uplifted JISA allowance.

YellowStarling

Thanks @Alexland
Appreciate the response.  Fair points well made, as they usually are by yourself, and it's helped - thanks.

carpy

can i open an s&s isa with 'new' money, and also open another s&s isa to transfer in 'old' isa cash?

Alexland

carpy said:

can i open an s&s isa with 'new' money, and also open another s&s isa to transfer in 'old' isa cash?

Yup

carpy

Alexland said:

carpy said:

can i open an s&s isa with 'new' money, and also open another s&s isa to transfer in 'old' isa cash?

Yup

in that case i'll probably open a fixed price one for my lump sum and open another one (with cashback) to trickle in some new money

carpy

the Nutmeg fee free offer for 12 months....does that cover all the fees or just their fee (therefore still having the cost of the fund costs + market spread)? 
i might go with them and then transfer out after 12 months

Alexland

Nutmeg's fee free offer probably just covers their fees as it seems highly unlikely they would give you money to compensate for the unavoidable market spread and ETF manager fees. If the offer you have seen includes cashback they usually require you to stay 2 years so read the terms carefully.

carpy

Alexland said:

Nutmeg's fee free offer probably just covers their fees as it seems highly unlikely they would give you money to compensate for the unavoidable market spread and ETF manager fees. If the offer you have seen includes cashback they usually require you to stay 2 years so read the terms carefully.

i was just weighing up whether it's better to go via TCB (£101) or go for the 12 months fees paid route.
the 12 months fees paid would work out more than TCB on my lump sum £40k, even if it's just their base fee. 
that's going to be the cheapest route for me to get into s&s isas as far as i can see, and then switch from nutmeg after 12 months into something like iweb?

EmmaG04

Alexland said:

To celebrate the start of a new tax year today my wife and I just opened L&G S&S ISAs to get a total of £213 TopCashBack. We have gone with the £500 lump sum then £100 per month profile. Once the cashback goes payable we will stop paying the £100 per month but ensure the accounts have the required minimum £2,500 of contributions (over the 24 months) before the end of this tax year. Next tax year we will probably make our S&S ISA contributions elsewhere if another provider has a good signup offer. Then just after the minimum 24 months offer clawback period, transfer the L&G ISAs into our larger iWeb ISAs.

Next job is to start filling up our S&S LISAs...

Alex, has your L&G stocks and shares isa been set up? I signed up 2 days ago and made my first payment. I got an email pretty much immediately saying my application has been approved, but I've not heard anything since and  I've not received my customer number to set up my account. When I signed up it said they send it out through email.