Stocks & Shares ISA newbie overwhelmed 1 March at 5:29PM in ISAs & tax-free savings 15 replies 844 views

Mr_T_Blue

Hello,

I have received £50,000.00 as a lump sum and as the financial year is closing I was thinking of investing in a Stocks & Shares ISA.

But there's loads of information so little time so I'm finding difficult to just hand over the money as I never done this

From what I understood I choose a provider and pay their charges but I don't pay any tax on 10% gains.

The charges seem to differ across providers which is expected but then the list of fees are difficult to understand like fund transactions placed, number of deals, etc.

Let's ignore the fees for now, this is how it works in my head:

1. March 2023: open account, transfer £20,000.00
   
2. 6 April 2023: balance is now £22,000.00 (10% year)
3. 7 April 2023: transfer another £20,000.00 bringing the total to £42,000.00
   
4. 6 April 2024: balance is now £46,200.00 (10% year)
5. no more transfers
   
6. [...] 2 years go past
   
7. 6 April 2026: balance is now £55,902.00 (10% year)

Is this the way it works?
I'm just thinking I could just choose a high paying savings account and be done with it.

Thank you.

eskbanker

Not sure where you're getting 10% from?  Returns from investments are highly variable - you might achieve, say, 6-8% on average over a number of years (although much will depend on exactly what you invest in), but there will be plenty of ups and downs along the way, such as 2022, when many investments were 10-15% down.

Sticking to savings may be more appropriate, at least while you research investing to the extent that you're ready to make a move, but average returns will be lower.  What's the money intended for, i.e. when are you likely to need it?

Have you considered pension contributions?

Albermarle

From what I understood I choose a provider and pay their charges but I don't pay any tax on 10% gains.

You do not pay tax on any gains.

1. March 2023: open account, transfer £20,000.00
   
2. 6 April 2023: balance is now £22,000.00 (10% year)

As above, no idea where you get this 10% figure from . In the timeline above , by April 6th 2023, your £20K could be less or more, or about the same, depending on how the investments perform.

Have a read of this
How to invest in a stocks and shares Isa: The quick and easy guide | This is Money

Mr_T_Blue

eskbanker said:

Not sure where you're getting 10% from?  Returns from investments are highly variable - you might achieve, say, 6-8% on average over a number of years (although much will depend on exactly what you invest in), but there will be plenty of ups and downs along the way, such as 2022, when many investments were 10-15% down.

Sticking to savings may be more appropriate, at least while you research investing to the extent that you're ready to make a move, but average returns will be lower.  What's the money intended for, i.e. when are you likely to need it?

Have you considered pension contributions?

Thank you.

So the 10% was from a video explaining how this works. I know investments are variable but I thought because it was an ISA it was different.

As for the purpose of the money, I have thought hours on end but I don't know for sure.

Ideally I would like to make more money from it as it's a huge sum for me and something that I wasn't expecting to get.

As for pension contributions I'm not sure. You mean what gets deducted on the payslip?

Albermarle

Mr_T_Blue said:

eskbanker said:

Not sure where you're getting 10% from?  Returns from investments are highly variable - you might achieve, say, 6-8% on average over a number of years (although much will depend on exactly what you invest in), but there will be plenty of ups and downs along the way, such as 2022, when many investments were 10-15% down.

Sticking to savings may be more appropriate, at least while you research investing to the extent that you're ready to make a move, but average returns will be lower.  What's the money intended for, i.e. when are you likely to need it?

Have you considered pension contributions?

Thank you.

So the 10% was from a video explaining how this works. I know investments are variable but I thought because it was an ISA it was different.

As for the purpose of the money, I have thought hours on end but I don't know for sure.

Ideally I would like to make more money from it as it's a huge sum for me and something that I wasn't expecting to get.

As for pension contributions I'm not sure. You mean what gets deducted on the payslip?

If you have the right investments and hold them for a very long time, then you could get an average return maybe approaching 10%. Probably more like 7/8%. However it is not guaranteed and will vary a lot from one year to the next . A drop of 40% in one year is not unheard of, but eventually you should see a decent average annual return, even if it is not 10%.
You can hold safer investments and the return would be less,but the ride less rocky.

eskbanker

Mr_T_Blue said:
So the 10% was from a video explaining how this works. I know investments are variable but I thought because it was an ISA it was different.

No, an ISA is just a wrapper, and performance is dependent only on the investments themselves.

Mr_T_Blue said:
As for the purpose of the money, I have thought hours on end but I don't know for sure.

Ideally I would like to make more money from it as it's a huge sum for me and something that I wasn't expecting to get.

It's important to have some sort of idea whether you're likely to need some or all of the money within the next, say, five years (in which case saving rather than investing is likely to be better), or if locking it away until retirement could be appropriate (in which case worth considering pension).

Mr_T_Blue said:
As for pension contributions I'm not sure. You mean what gets deducted on the payslip?

It was a broader question really, i.e. what are your plans for retirement funding?  If your workplace pension scheme is generous then you may not need to consider topping it up with a separate private one, but worth thinking about this if you have a spare pot of money without an identified use, although you may be a long way from retiring?

Mr_T_Blue

eskbanker said:

It's important to have some sort of idea whether you're likely to need some or all of the money within the next, say, five years (in which case saving rather than investing is likely to be better), or if locking it away until retirement could be appropriate (in which case worth considering pension).

I think I could lock away some but the more I think about I wouldn't feel comfortable with half of it out of the way.
I probably have another 25 years until retirement but things may change during such a long span of time (children, change countries, etc).

So maybe will put most of it in savings which allow me to withdrawal with short notice and invest the rest 🤔

Consumer3

From what you have said, personally I would suggest you don’t worry about investing it in a rush to make it before the end of this tax year, pop it into a high interest easy access savings account for now. Then do some reading about savings/investing/pensions etc, this forum is a great start. 

Get down on paper what you would like to achieve long term, including how you see your retirement as you may want to add some of it to your pension. Having a plan/goals and revisiting them on a yearly basis will be helpful. 

It’s a good sum and doing the work to learn and understand more about investing will help you make the most of it - even if it means you enjoy some of it now. 

dealyboy

Hi @Mr_T_Blue ...
I think it might be a good idea to open a Cash ISA in this tax year (by April 5th) otherwise you will lose the allowance.

After that you can decide what you want to do  for the longer term, look into stocks and shares ISAs (wrappers for investment products) and for you to decide your investment strategy and your risk tolerance. You can transfer your Cash ISA to a S&S ISA and add or open a new one in 2023/24.

You may want to look at personal pensions but don't pressure yourself. There's a lot of useful info available moneyhelper, monevator and here, to name but three.

ForumUser7

dealyboy said:

Hi @Mr_T_Blue ...
I think it might be a good idea to open a Cash ISA in this tax year (by April 5th) otherwise you will lose the allowance.

After that you can decide what you want to do  for the longer term, look into stocks and shares ISAs (wrappers for investment products) and for you to decide your investment strategy and your risk tolerance. You can transfer your Cash ISA to a S&S ISA and add or open a new one in 2023/24.

You may want to look at personal pensions but don't pressure yourself. There's a lot of useful info available moneyhelper, monevator and here, to name but three.

https://moneyfacts.co.uk/isa/easy-access-cash-isas/

@Mr_T_Blue this link has lots of good cash ISAs (if you want easy access, until you've decided re investment). As @dealyboy says, you can then transfer the Cash ISA to a Stocks and Shares ISA and still have the allowance for the 2023/24 tax year. N.B. All ISA providers have to allow transfers out, but they don’t have to allow transfers in, so check the ts and cs for any platform you want to use before you plan the transfer

Mr_T_Blue

Thank you everyone!

I miss the notifications for latest replies.

Can I treat a Cash ISA like any savings account?
Say I deposit 20k still in March expecting to receive interest in a year's time, can I still put another 20k in May 2023 (new fiscal year) for a total of 40k?
Or would it better just to add 40k to a savings account?

Thank you.