Multi asset ETF for S&S ISA

barmeysmb1

Hi,
Looking to invest 10k initially, long term in a highly  diversified ETF inside a S&S ISA wrapper.
I have emergency funds set aside, so do not need to touch this short term. I'm 48 years old and have a good pension covered (higher raite tax payer)

I'd also plan to top up the ISA with around £200 per month.

Would Fundsmith Equity be a good choice at the moment or are there better options out there ? 
I also have an existing ISA without around £2k which was used for 'a day trading folly' so may also move that across if possible.

dunstonh

Looking to invest 10k initially, long term in a highly  diversified ETF inside a S&S ISA wrapper.

Why ETF?

Would Fundsmith Equity be a good choice at the moment or are there better options out there ? 

It's not an ETF for starters.  So, fails one part of your requirements.

barmeysmb1

Thanks @dunstonh

Perhaps i've got the nomenclature a bit mixed up. What i really mean is, in layman terms is i'm looking for a safe(er) diversified fund, but incorrectly assumed these were all ETF's. I have no leaning especially toward an ETF, just a wrong assumption.

I generally see recommendations in the threads such as Vanguard LS etc - so assumed Fundsmith was a similar type fund, albeit one that is mentioned in the top 10, at least on morningstar.

Alexland

Fundsmith is a concentrated portfolio of shares with similar properties. It is not multi asset as it has no bonds, property, etc. As such it's going to be more volatile than VLS60/80 and I would argue less safe than a broad tracker fund as the specific type of shares it holds could go out of style as the market changes.

barmeysmb1

ok, thankyou, Fundsmiths is out in that case, my mistake.

barmeysmb1

For my learning - when looking for comparisons, is there a specific type of name for funds like VLS60/80 ?

ie are these generally termed 'Lifestyle' funds ?

Alexland

We generally call them multi or mixed asset fund series. Also look at HSBC Global Strategy, L&G Multi Index and Blackrock Consensus for similar low cost funds.

Sometimes Lifestyling refers to the derisking of the asset allocation as you get closer to withdrawal. Confusingly VLS doesn't do this but Vanguard Target Retirement does.

Also if you are paying higher rate tax have you considered making more pension contributions?

barmeysmb1

I'm paying in currently 5% of salary so would need to check if i can pay in more.
Presumably recommended due to the higher rate tax relief...?

barmeysmb1

Checked - indeed i can pay A LOT more into the pension. The AA (Annual allowance) for my pension scheme is upto £40k a year.

What are the downsides of doing this vs the S&S ISA ? 

This is how my pension funds are split also

Alexland

Generally the advantage of paying your higher rate income into your pension is that, under current rules, you get 25% tax free and would draw the remainder during retirement when you are more likely to be a basic rate taxpayer. So you save 40% (or 42% if your employer operates salary sacrifice to also save the national insurance) now to pay 15% later (25% at 0% tax and 75% at 20% tax).

The main disadvantages are that the rules might change, you cannot access until later and if your pension gets big enough the lifetime allowance.

Also a little known benefit is that pension contributions can reduce your income such that you can benefit from child benefit if you have kids.

barmeysmb1

Thanks @Alexland - contributing more to the pension definitely makes financial sense, it's the potential rule changes that worry me. Definitely a good strategy for something like an eventual retirement income though.

I've always wondered how the amount above the 25% lump sum is taxed - ie, lets say i payed 40% tax for most of the latter part of my career but then took a position that meant being a basic rate tax payer, shortly before retiring, would the basic rate apply to lump sums above the 25% / and what are the caveats ..