2021/2022 S&S ISA Choice

DireEmblem

Morning all - happy Easter!

I've been mulling over this weekend, what to do with next tax years ISA allowance, and I think my answer right now, is not to use it just yet.

Here is why:

85% of what I hold is Mutual Funds:

• Vanguard LifeStrategy 100% Equity Fund A Acc - 0.22% OCF
  
• HSBC FTSE All-World Index Fund Accumulation C Acc - 0.13% OCF
  
• Baillie Gifford Long Term Global Growth B Acc - 0.64% OCF

The other 15% I hold in a mix of investment Trusts, all world ETFs and stocks outside my ISA, and utilise nowhere near the full 12.3k CGT allowance each year.

I currently have my S&S ISA with Fidelity, that are charging me 0.25% platform fee, rising to 0.35% in September.  Lets call this 0.3% for the year.  The way I see this, is that is approximately 3% of fees in 10 years.

At the end of each tax year, I check to see if I should rebalance my holdings AND change provider.  The provider part is difficult, as they all have different fee structures.  The way I try to summarise it is as below:

• AJ Bell - 0.25% platform fee and £1.50 per trade buying/selling funds.
• Fidelity - 0.35% platform fee and no charge for buying/selling funds.
• Hargreaves - 0.45% platform fee and no charge for buying/selling Funds.
• Interactive Investor - £9.99 a month platform fee, no charge for buying/selling Funds if you follow their regular investment plan.  1 free trade per month outside this.
• iWeb - £100 account opening fee and £5 a trade.
• Vanguard - 0.15% platform fee, but restricted to Vanguard Funds.

So above, all different fee structures.  AJB is more expensive than Fidelity if you buy/sell one stock a month and have a balance less than 18k.  Interactive Investor could be the cheaper than Fidelity if you have a cash balance above 65k, and take advantage of their regular trading scheme.  iWeb is really just for large balances, and Vanguard, well you are restricted to their own products.

So why am I thinking about not picking any just yet?  Well with the rise of free trade platforms, we now have the option to invest in ETFs with no trade or platform fees.  I'm thinking things like the following:

• VWRP Vanguard FTSE All-World UCITS ETF GBP Acc - 0.22% OCF

• HMWO HSBC MSCI World UCITS ETF (GBP) - 0.15% OCF

ETFs have not been something I would have considered much before given trading costs to open a position on platforms, but it is now appealing these can be purchased without trading fees or platform fees.  FreeTrade and Trading212 both offer these with no transaction/platform costs at present.  Similarly if I could save up 20k over the year, then you are talking an average balance invested of 10k, so taking an average 0.3% charge with fidelity, would only be a £30 saving on new funds.

As you would expect - the long term performance profile of most my global equity holdings in ETF/Mutual Fund form are nearly identical bar the one fund I hold.

Linton

The amount of money you are on average losing by being out of the market for a month or two is likely to be much higher than the differences of 0.1% in charges you are fretting about.

DireEmblem

I agree Linton.  Thats why my thoughts are to make no changes for the moment.  Apologies that probably wasn't clear.  I'm thinking of building up a balance outside my current ISA, and not contributing yet in 2021/2022.

Albermarle

If you change to all ETF's with Fidelity , the platform charge is capped at £45. Buying them will cost £10 a time .
You may want to consider the long term future and stability of the platform as part of your decision making,
A very large company established in the 1950's, with Trillions of dollars under management, and presumably a sustainable profitable business/charging model .
Or a relatively new business that currently charges no fees .

Michael_Nottingham

Linton said:

The amount of money you are on average losing by being out of the market for a month or two is likely to be much higher than the differences of 0.1% in charges you are fretting about.

Why not transfer in specie?
That means you aren't out the market and saves any stamp duty, spread and dealing fees.
It takes longer and may restrict your ability to trade, but that doesn't bother me as I very rarely sell anything.
I have just transferred some of my ISAs / SIPPS around to fixed fee brokers (HL in shares / ETF) and reduced costs by c£3k per annum + Cashback on top - so definitely worth keeping on top of!

DireEmblem

Thanks Michael, yes in specie transfers is part why I'm thinking of changing nothing right now as fidelity would allow for that in the future and the size I have at the moment is negligible really.  We're talking <£100 in platform fees as I raided my ISA a few years back to buy my flat, and then had some work to cover the last few years.  I also cant see these free trade type platforms remaining 'free' forever, but then I am thinking of taking advantage of the 12.3k capital gains allowance with them in the short term.

Well done on the 3k per annum though!