Switching from cash ISAs to S&S

Mellow_gogo

Hi, I currently have just under 160K in a number of separate cash ISAs. As part of a wider financial review, I’ve belatedly realised that this is crazy so now plan to switch just over two thirds of this amount from 3 separate ISAs (value of each:- 85k, 20k and 7k into one S&S ISA. 

I have no experience of this kind of investing and don’t foresee having the confidence, knowledge or time to manage things myself. However, from reading on this site I am considering using one of the three ’do it for me’ platforms eg Evestor, to make the switch. I am pretty risk averse so would instruct them to proceed in this way. I hope to be able to invest this amount for 8-10 years. 

-Can I lump together the three ISAs as described above to form one new S&S ISA?  

-Any opinions on experience of using any of these platforms?
-Given my circumstances does this plan make general sense or am I missing anything obvious!

I want to stay low risk as I view my ISA savings as a pot to subsidise a hopeful reduction in working hours as I get in to my mid-late 50s (I’m 49 now), and therefore to avoid accessing my local govt pension scheme too early.  However, with cash ISA rates pitifully low I don’t want to see my hard earned pot be eroded by inflation. 

 
Thanks in advance for any opinions/ advice. 
 

masonic

Yes you can transfer several cash ISAs into your S&S ISA. Is there any particular reason you want to go for a relatively expensive provider like Evestor rather than using a cheap platform and buying a single multi-asset fund?

Some example costings:

£112,000 at Evestor would cost £549 per year in platform+fund fees
£112,000 at Vanguard in a Vanguard Lifestrategy fund (VLS) would cost £414
£112,000 at iWeb in VLS would cost £246 (+£100 opening fee in year 1)

(alternative multi-asset funds: L&G Multi-index, HSBC Global Strategy)

or for an equities/cash portfolio: £67,200 at iWeb in Fidelity Index World would cost £81 (+£100 opening fee in year 1), an additional £44,800 in a cash ISA would cost nothing

'Pretty risk averse' would see you end up with mostly bonds, which have very low projected returns, perhaps less than cash, so would it not make sense to invest less, but in higher risk assets?

Mellow_gogo

Hi, I just assumed that the ’robo-investor’ platforms would be the cheapest. I hadn’t considered anything else yet for that reason. 

Good point re taking more risk with a lower level of investment. Something for me to think about. 

Also, I guess I shouldn’t actually be looking at putting anything over 85k with one provider anyway?

masonic

Mellow_gogo said:

Also, I guess I shouldn’t actually be looking at putting anything over 85k with one provider anyway?

The situation is different with investments vs cash. Investments are held by a trustee and ring-fenced from the operating company. If the company goes bust, your assets are still there (unlike banks who use your cash to finance their business). The risks are fraud (highly unlikely all the platform's assets would be stolen) and costs associated with transferring the assets to a new home if the provider goes bust (will tend to be a low percentage of the value of the assets, and may be capped below the FSCS limit per investor). It should not be a great concern to hold investments worth a few times the FSCS limit in one place. Though I'd be more cautious about small players and startups like the recent wave of Robo platforms than major players like Halifax (who runs iWeb) or Vanguard.

Albermarle

Pretty risk averse' would see you end up with mostly bonds, which have very low projected returns, perhaps less than cash, so would it not make sense to invest less, but in higher risk assets?
I think this a sensible strategy in the current climate .
A typical low risk fund is high in bonds and low in equities , based on historical info. However bonds are still an investment that can go up and down and  as said the outlook for bonds is not great . My own bond fund has lost 7% this year so far , whilst equities have gone up by around 4%.
I have no experience of this kind of investing and don’t foresee having the confidence, knowledge or time to manage things myself.
However you are the one who still has to make certain decisions, like which platform and then which fund to choose . I think for a substantial sum like 100 grand , it is not sensible yo try and be completely hands off.
You seem to have already made one quite big decision - to invest in a S&S ISA instead of a new pension . Pension is more tax efficient normally .

Mellow_gogo

Thanks for that. 

Given my inexperience in all of this, would you consider it prudent for me to consult an IFA to help make a fully informed investment decision, given it’s a 6 figure sum we’re talking about, or should I continue reading around the topic and gaining knowledge and wisdom that way? My only worry with the latter is that wisdom tends to come from mistakes made and lessons learned!

Albermarle

It's a question asked many times on this forum .
You can see it like mending  a car yourself . If you know what you are doing you can save money by not taking it the garage.
However if you are clueless and not willing to learn/take the risk , better let a professional do it.
Having said that it is probably easier to learn the basics of investing than car mechanics, especially nowadays with the internet and this forum of course !
An IFA ( better than a FA from a bank or similar, who is restricted in what they can offer ) will charge around £2K initially and then around 0.75% pa on an ongoing basis .

masonic

Mellow_gogo said:

Thanks for that. 

Given my inexperience in all of this, would you consider it prudent for me to consult an IFA to help make a fully informed investment decision, given it’s a 6 figure sum we’re talking about, or should I continue reading around the topic and gaining knowledge and wisdom that way? My only worry with the latter is that wisdom tends to come from mistakes made and lessons learned!

At that level of investment an IFA can make sense, but comes at a cost. If you are willing to invest a few hours of your time doing some reading then you should be able get an adequate understanding to be able to make your own sensible investment decisions. Sites like Monevator are a good place to start. If going for a passive multi-asset or global portfolio, the single fund options make life a lot easier and remove the possibility of making a lot of the classic investment mistakes. An IFA is not needed if going down this road.

Mellow_gogo

Thank you both. I wasn’t aware that IFA costs were so high - shows my naivety I guess!

 I think I will ‘invest’ some time reading around the subject here and elsewhere first, as you suggested. Sounds like it could be time well spent! Then hopefully I’ll feel better informed to make my own decisions. The incentive to retire a little earlier will I feel focus my mind!

Albermarle

Probably a good decision . 
There are probably three  separate issues to think/learn about .
Be clear on what you are actually trying to achieve. 
Work out the best way to invest ( mainly for tax reasons ) . Normally this means S&S ISA vs pension ( not the sort of pension you have with your local govt job )
Assess your risk tolerance and then work out the best simple low cost investments.
You can start with these links but you will also find reading the forum useful. A lot of similar new investors ask the same questions and often get similar answers.
Pensions & Investing - MoneySavingExpert
Long-term investing: Increasing your chances of positive returns (nutmeg.com)

Mellow_gogo

Thank you for the advice and links. You’ll probably see me on this forum again over the coming weeks!