Switching from distributing to accumulating fund ISA

Steven124

Hi everyone,
Earlier today, I had another question regarding my ISA which was answered in the other thread. Now I have different questions, so I opened a new thread.

I opened my ISA last year through iWeb, and bought two funds that are both distributing. 
I now realize my mistake. I don't plan on withdrawing any money from my ISA account in the foreseeable future.

In this case accumulating funds are preferred. Am I correct?

What is the process of switching from distributing to accumulating funds? Does anyone have any experience in this regard (with iWeb)?

What are the fees for switching from distributing to accumulating funds?

Steven124

When I am ready to sell my funds in the ISA (maybe 10-15 years from today). Can you sell accumulating funds? I thought I read somewhere that you can not sell accumulating funds. If you need to withdraw money from your ISA account, first you have to switch from accumulating funds to distributing fund. Then sell the distributing fund, then withdraw the money. Is that correct? I don't know where I saw that. I am relatively new to the world of investing.

I appreciate your patience.

masonic

If you buy distributing funds then you will receive income that you'll need to reinvest yourself eventually. Likely you'll get the opportunity to include this money together with new contributions. Switching to accumulating will cost you £10 to per fund and you'll have some time out of the market. I'm not sure it's worth bothering.

You can sell either distributing or accumulating fund units in exactly the same way.

Steven124

Thanks Masonic 

dunstonh

I opened my ISA last year through iWeb, and bought two funds that are both distributing. 
I now realize my mistake. I don't plan on withdrawing any money from my ISA account in the foreseeable future.

How is that a mistake?  I prefer income units and use them most of the time.

In this case accumulating funds are preferred. Am I correct?

No.      With income reinvested, the returns between ACC and INC are the same.

aroominyork

dunstonh said:

I opened my ISA last year through iWeb, and bought two funds that are both distributing. 
I now realize my mistake. I don't plan on withdrawing any money from my ISA account in the foreseeable future.

How is that a mistake?  I prefer income units and use them most of the time.

That is a curious comment which, to a novice investor, could be confusing. Most people who are growing their investments for the future find Acc funds easier and cheaper to manage. 

LHW99

aroominyork said:

dunstonh said:

I opened my ISA last year through iWeb, and bought two funds that are both distributing. 
I now realize my mistake. I don't plan on withdrawing any money from my ISA account in the foreseeable future.

How is that a mistake?  I prefer income units and use them most of the time.

That is a curious comment which, to a novice investor, could be confusing. Most people who are growing their investments for the future find Acc funds easier and cheaper to manage. 

Only if they are doing it through an ISA or pension - if a novice has bought them unwrapped, then I believe inc funds are easier than acc in relation to records for tax.

dunstonh

aroominyork said:

dunstonh said:

I opened my ISA last year through iWeb, and bought two funds that are both distributing. 
I now realize my mistake. I don't plan on withdrawing any money from my ISA account in the foreseeable future.

How is that a mistake?  I prefer income units and use them most of the time.

That is a curious comment which, to a novice investor, could be confusing. Most people who are growing their investments for the future find Acc funds easier and cheaper to manage. 

The good thing about this discussion board is that when people engage in a thread, they can learn things and not be as much as a novice.

There is nothing curious about holding income units.     If you held shares, they would pay dividends.   If you hold savings, they pay interest.  Income is a normal part of saving or investing.   So, seeing the income shouldn't be confusing.   Using the income to reinvest to buy more units shouldn't be confusing.     

Many platforms will reinvest the dividends for you at no cost.  Either by buying the same units or using the income to rebuy the units as a form of rebalancing.  Or they will leave them in the cash account for you to decide manually.   

And as mentioned above, ACC units are a pain when it comes to capital gains tax calculations on GIAs.   

incus432

I consider Acc funds in ISAs and SIPPs better for those who are not so interested in financial stuff (like my wife) and may not bother to check the account and reinvest dividends. 

ChesterDog

Depending on the fund used and the policy of the investment platform, you might find that not all the dividend income can be reinvested (purchase of whole units only) and there can be a delay in doing so, especially when it's automated.

aroominyork

dunstonh said:

aroominyork said:

dunstonh said:

I opened my ISA last year through iWeb, and bought two funds that are both distributing. 
I now realize my mistake. I don't plan on withdrawing any money from my ISA account in the foreseeable future.

How is that a mistake?  I prefer income units and use them most of the time.

That is a curious comment which, to a novice investor, could be confusing. Most people who are growing their investments for the future find Acc funds easier and cheaper to manage. 

The good thing about this discussion board is that when people engage in a thread, they can learn things and not be as much as a novice.

There is nothing curious about holding income units.     If you held shares, they would pay dividends.   If you hold savings, they pay interest.  Income is a normal part of saving or investing.   So, seeing the income shouldn't be confusing.   Using the income to reinvest to buy more units shouldn't be confusing.     

Many platforms will reinvest the dividends for you at no cost.  Either by buying the same units or using the income to rebuy the units as a form of rebalancing.  Or they will leave them in the cash account for you to decide manually.   

And as mentioned above, ACC units are a pain when it comes to capital gains tax calculations on GIAs.   

Totally agree. In my GIA I only hold Inc. units, but this thread is about ISA for the long term; in wrapped accounts during the accumulation period I would always (given the option) hold Acc.