Vanguard S & S ISA transfer out

Mary108

Hi everyone

I have a Vanguard S & S ISA with just under £40 K in it, built up over a few (previous) years. Its in Life strategy 80%

I'm likely to need to draw on it in the next year or so and with the changing Vanguard fees I'm starting to wonder if my money would be safer (no drops in growth) and more easily accessible in a one year fixed rate cash ISA

Is it easy to transfer from Vanguard S & S to a cash ISA?

What do you guys think about this idea?

Thank you

Mary

eskbanker

Mary108 said:

I have a Vanguard S & S ISA with just under £40 K in it, built up over a few (previous) years. Its in Life strategy 80%

I'm likely to need to draw on it in the next year or so and with the changing Vanguard fees I'm starting to wonder if my money would be safer (no drops in growth) and more easily accessible in a one year fixed rate cash ISA

Is it easy to transfer from Vanguard S & S to a cash ISA?

Firstly the changing Vanguard fees are irrelevant, as someone with a portfolio the size of yours will pay the same fees as now.

The principle of derisking prior to access is sound, so moving from investments into cash is sensible for money that you'll need in the short term, which, in investment terms, would usually be anything up to a few years, so yes, migrating to cash probably suits your situation, at least for whatever you need to draw over the next few years.  While it's true that you can access ISA money at any time, using fixed rate products entails penalties for early access, so consider carefully when you're likely to need to access the money, as easy access may be better.

And yes, it's easy, from the new cash ISA perspective it's much the same process as transferring from another cash ISA except that you may wish to consider selling the funds at a time of your choosing rather than this happening as part of the transfer, which can and often do take longer than a transfer from a cash ISA.

Alexland

Yes if markets crash you might see recent years of growth in VLS80 go into reverse and drops of around 35%+ depending on the scenario. You could move the proportion of the account valuation you intend to withdraw into Vanguard's money market fund which would provide a similar return to a good cash savings account with very little risk.
https://www.vanguardinvestor.co.uk/investing-explained/what-are-money-market-funds
https://www.vanguardinvestor.co.uk/investments/vanguard-sterling-short-term-money-market-fund-a-gbp-accumulation/overview
This may be more convenient for the next year than doing a transfer to a Cash ISA especially if you do not intend to do a full withdrawal and want to leave some invested long term. However if the account balance drops below £32k then the minimum monthly platform fee will apply so it depends how much you intend to withdraw as to if the Vanguard platform would remain attractive for your residual needs.
If the account is going to become very small then it may be better to start again with a new strategy such using Dodl with their limited fund range, ETFs on T212 or InvestEngine or maybe a fund on iWeb if you only make occasional £5 trades.

Mary108

except that you may wish to consider selling the funds at a time of your choosing rather than this happening as part of the transfer, which can and often do take longer than a transfer from a cash ISA.


Thanks for your reply, @eskbanker......I'm not sure what the above means, though. Surely if I ask for the S&S ISA to be transferred, everything gets sold for the transfer? How do I sell funds and THEN ask for a transfer and how do I know when is a good time to sell? Sorry to be dim!

Mary108

Thanks @Alexland

So......Vanguards Money Market Fund is like a cash ISA? 

Alexland

Mary108 said:

Thanks for your reply, @eskbanker......I'm not sure what the above means, though. Surely if I ask for the S&S ISA to be transferred, everything gets sold for the transfer? How do I sell funds and THEN ask for a transfer and how do I know when is a good time to sell? Sorry to be dim!

If you need some/all of the money in the next year the best time to sell some/all of your VLS80 is now (rather than wait for it to happen as part of a cash ISA transfer-out) as regardless of it goes up or down in the next days or year it's not suitable for your investment timescales. VLS80 could crash at any moment and take a long time to recover. This type of fund is for people who can invest for 7+ years preferably longer I'd say around 10 years to give time for it to recover and then go on to generate returns that would be at least as good as cash so you haven't lost out. You can sell the fund units and would then have a cash balance within your S&S ISA wrapper.

Mary108 said:

Thanks @Alexland
So......Vanguards Money Market Fund is like a cash ISA? 

It would still be a S&S ISA but some/all of the the account valuation would be invested in a money market fund that is similar but not the same as cash that should provide a better return than leaving the money as uninvested cash in the S&S ISA account and would save you the hassle of transferring to a cash isa provider. Expect the fund to deliver around 4-5% over the next year with very little risk or volatility.

Mary108

I think I understand @Alexland

If I ask Vanguard to sell everything within my S&S ISA what would they then do with all the money from the sale whilst waiting for the transfer to a cash ISA?

I can see that Vanguard charge for me using the Money Market Fund....but you think I might still make around 4 - 5% in the MMF despite Vanguard's fee?

Thank you

Alexland

Mary108 said:

If I ask Vanguard to sell everything within my S&S ISA what would they then do with all the money from the sale whilst waiting for the transfer to a cash ISA?

If you sold the VLS80 units the money would just sit as cash in your S&S ISA account earning 2.35% interest.
https://www.vanguardinvestor.co.uk/need-help/answer/will-i-receive-interest-on-cash-held-in-my-account

Mary108 said:

I can see that Vanguard charge for me using the Money Market Fund....but you think I might still make around 4 - 5% in the MMF despite Vanguard's fee?

Yes as the MMF charge is only 0.12% and the platform charge remains 0.15% and the portfolio yield is currently around 4.5%. When you look at the portfolio it's short dated bonds close to redemption from high quality issuers such as the UK Treasury. There is still some risk but it's one of the safest investments available. You might still do better moving to a Cash ISA but it's a convenient option for the money you intend to eventually withdraw.

The most important point in all this is that the consensus of investing theory says it's time to sell some/all of VLS80 as it is totally unsuitable for the money you intend to withdraw in the next year and holding onto it would be a complete gamble. What do with the proceeds is up to you - either shop around for cash savings products or just stick it in a money market fund for convenience.

Mary108

I see. Thank you so much @Alexland and @eskbanker

I am really grateful for your help