Accumulation vs Income (S&S ISA)

eskbanker

20122013 said:

In Paragraph 3: 'The key point here is that with accumulation units you don't receive additional units when the income is reinvested but the unit price is raised'

Would someone be able to tell me if I have understood this article correctly? With accumulation units you don't receive additional units when the income is reinvested but the unit price is raised?

If so, is it better to have received more units or have unit price increased?  If I am unlikely to withdraw income etc from the fund.

It doesn't matter, unless you believe that there's any meaningful difference between, say, 11 units at £10 and 10 units at £11, if starting with 10 units at £10 and then seeing 10% growth.

Edit: if not planning to take the income then acc will generally be better than inc as there won't be any dividend reinvestment costs.

InvesterJones

20122013 said:

For the fund  I want to buy  there is a ACC and a INC version and they each has its own unit price (the ACC unit price is higher).

I was reading this article:

https://www.boringmoney.co.uk/ask/why-are-accumulation-units-more-highly-priced-than-income-units-and-seem-to-show-much-higher/

and

In Paragraph 3: 'The key point here is that with accumulation units you don't receive additional units when the income is reinvested but the unit price is raised'

Would someone be able to tell me if I have understood this article correctly? With accumulation units you don't receive additional units when the income is reinvested but the unit price is raised?

If so, is it better to have received more units or have unit price increased?  If I am unlikely to withdraw income etc from the fund.

As I have switched all to ACC (I understand that these can be switch to INC  at any time).

 Which is higher: 5x20 or 10x10?

Linton

Your understanding is correct, ACC funds simply increase the size of the pot as the dividends are received which therefore increases the price.   If you used the income from an INC fund to buy more units the price the of units would stay the same but the number would increase. So if there are 2 versions of a fund, one INC and the other ACC you would expect the ACC price to increase faster than the INC.   Except for transaction charges It makes no difference fnancially.

One reason to use ACC funds: much less hassle to reinvest
One reason to use INC funds: you may want some cash in your account to pay management fees or to invest elsewhere.

One factor if you are using a taxable GIA - Tax calculations are simpler with INC funds since the dividend income and capital growth are clearly identifiable.

20122013

Appreciate all the replies - reassuring

I have checked and in real life the same fund  per unit price is :

 

ACC Buy:317.53p
INC Buy:264.00p

In financial sense: if, again, I am not planning to take any withdraw from my investment - would it be better to choose the INC fund as the unit price is lower so less cost in fees and cheaper to buy the same number of units?  (I'd like to understand more)

and if it is true, I should switch to INC and then manually invest the income back to the investment (as there should be not trading fee) ? I do not mind doing the admin ?

eskbanker

20122013 said:

I have checked and in real life the same fund  per unit price is :

 

ACC Buy:317.53p
INC Buy:264.00p

In financial sense: if, again, I am not planning to take any withdraw from my investment - would it be better to choose the INC fund as the unit price is lower so less cost in fees and cheaper to buy the same number of units?  (I'd like to understand more)

No!  Don't focus on the unit price, or the number of units for that matter - if you plan to invest, say, £10K, then the transaction cost will be x% of £10k, regardless of whether you buy 10,000 units at £1 or one unit at £10,000....

20122013

eskbanker said:

No!  Don't focus on the unit price, or the number of units for that matter - if you plan to invest, say, £10K, then the transaction cost will be x% of £10k, regardless of whether you buy 10,000 units at £1 or one unit
at £10,000....

(EDITED out some duplicated text.)

Is it because I am starting with the same amount of investment and the fee will be the same, and hopefully it will increase and so will the fee.  (thanks !)

A slightly different question.  I have completed a switch from 29 to 1 fund today and planning to do a specie transfer to a different platform. I have 3 items which I cannot include on my switch request and the platform fee still applies.

Aviva Inv UK Prop Fdr Acc 2 Units 928.662 | Price £0.86 | Value £801.34    
Cash in my S&S ISA account £149.59    
Cash in my GIA  £140.03

is it possible to get this out of my current platform and keep the S&S ISA status?

Also, the switch will take one week, is it wise to ask the new provider to start the transfer request so the transter will start aasp, or is it better to wait till the switch is complete?

masonic

Can you sell the Aviva property fund? A problem with this type of fund is that it contains illiquid assets and therefore is frozen at times because it does not have enough liquid assets to repay investors. When it can be sold then you can do so and use an ISA transfer to move the cash.

The existing S&S ISA cash should get transferred at the end of your in specie transfer if you request this. The GIA cash can be moved by you.

I would wait until the switch is complete before initiating the transfer.

eskbanker

20122013 said:
A slightly different question.  I have completed a switch from 29 to 1 fund today and planning to do a specie transfer to a different platform. I have 3 items which I cannot include on my switch request and the platform fee still applies.

Aviva Inv UK Prop Fdr Acc 2 Units 928.662 | Price £0.86 | Value £801.34    
Cash in my S&S ISA account £149.59    
Cash in my GIA  £140.03

is it possible to get this out of my current platform and keep the S&S ISA status?

You can instruct your new ISA provider to fully transfer your S&S ISA, which will transfer the new fund you're buying (assuming they support it), plus the cash (not the GIA balance, which will be unaffected by the ISA transfer but can be withdrawn at any time).  Assuming it isn't supported by the new platform, they'll also enforce the sale of the Aviva fund and transfer the proceeds, but selling like this is sometimes chargeable so you might be better to just do it yourself asap.

Personally I'd wait until everything is ready before initiating the transfer.

20122013

masonic said:

Can you sell the Aviva property fund? A problem with this type of fund is that it contains illiquid assets and therefore is frozen at times because it does not have enough liquid assets to repay investors. When it can be sold then you can do so and use an ISA transfer to move the cash.

The existing S&S ISA cash should get transferred at the end of your in specie transfer if you request this. The GIA cash can be moved by you.

I would wait until the switch is complete before initiating the transfer.

Unfortunately,  my current provider's information is inconsistent with what I can do with the suspended Aviva fund. I will ask the new provider whether they can accept it  (as I am still being charge a fee and no interest,).Thanks for your and other replies as I had replaced most of the funds (each with on FM transaction costs leaving them of  approx 0.5% each), looking forward to lower fees and better service.

I was hoping to instruct the new provider to initate the process and as current provider takes longer time to complete tasks. So to keep current provider on their toes, but for whatever reason, I will wait, as I guess best not to treat it as a cash ISA transfer.

masonic

20122013 said:

masonic said:

Can you sell the Aviva property fund? A problem with this type of fund is that it contains illiquid assets and therefore is frozen at times because it does not have enough liquid assets to repay investors. When it can be sold then you can do so and use an ISA transfer to move the cash.

The existing S&S ISA cash should get transferred at the end of your in specie transfer if you request this. The GIA cash can be moved by you.

I would wait until the switch is complete before initiating the transfer.

Unfortunately,  my current provider's information is inconsistent with what I can do with the suspended Aviva fund. I will ask the new provider whether they can accept it  (as I am still being charge a fee and no interest,).Thanks for your and other replies as I had replaced most of the funds (each with on FM transaction costs leaving them of  approx 0.5% each), looking forward to lower fees and better service.

I was hoping to instruct the new provider to initate the process and as current provider takes longer time to complete tasks. So to keep current provider on their toes, but for whatever reason, I will wait, as I guess best not to treat it as a cash ISA transfer.

It's theoretically possible to transfer a suspended fund, but most providers won't accept them. No harm in trying, but I suspect they will tell you it must be excluded. I don't think continued fees on £800 worth will make much difference in the grand scheme of things.