Shepherds Friendly £100pm and ISA allowance

nottsphil

I've only ever owned nationalisation shares, and I'm now dipping my toe into the world of managed stocks and shares funds. Being a cautious investor I thought I would start off with a £100 pm ISA with the 199 year old Shepherds Friendly Society. I realise my investment might have lost value a year from now but there is a generous cashback offer which comes at the £1200 level. I limited my sole deposit into a cash ISA for this tax year a week ago to allow for this but mistyped and deposited £18950 instead of £18750. However it's a flexible cash ISA, so can I simply take a bit back out and use it to boost the £1050 allowance currently remaining for the Shepherd's Friendly?

dunstonh

 Being a cautious investor I thought I would start off with a £100 pm ISA with the 199 year old Shepherds Friendly Society. 

Not a great option.  It's very expensive and low quality.   Something pretty consistent amongst friendly societies.

surreysaver

No. You'd have to do it as a partial ISA transfer, unless the ISA you've paid into comes with a cooling off period and you can have it nullified 

nottsphil

surreysaver said:

No. You'd have to do it as a partial ISA transfer, unless the ISA you've paid into comes with a cooling off period and you can have it nullified 

I actually have an old Nottingham Building Society ISA which I never bothered transferring because the balance was so low. It would cover this shortfall though.
I wouldn't want this year's ISA nullifying because it's an easy access 4.76% AER. It's actually the one featured here
 https://forums.moneysavingexpert.com/discussion/6605506/bank-paid-me-interest-within-an-hour-of-funding-new-a-c

nottsphil

dunstonh said:

 Being a cautious investor I thought I would start off with a £100 pm ISA with the 199 year old Shepherds Friendly Society. 

Not a great option.  It's very expensive and low quality.   Something pretty consistent amongst friendly societies.

Thanks for opening my thread, Dunstonh. You're the only poster I would trust without getting confirmation from someone else. That's just as well because I only have until midnight to make this decision 😃. So, would it make any difference if I told you that the cashback wasn't the £100 offered by directly by SF themselves but £325 via Topcashback? (Your reply explains how SF can be so generous!). If that's still a poor deal then how about the £155 for £30pm? My £360 would have to have lost more than two fifths of its value in a year for me to lose out, Shirley?

dunstonh

The AMC is 1.5%.  That compares with around 0.3-0.4% at the low cost quality end.       So, they are taking around 1.1% a year more.

So, if the value you are investing multiplied by 1.1% is less than the cashback then it is viable thanks ot the cashback.  (it looks like the tie in is 12 months)

nottsphil

dunstonh said:

The AMC is 1.5%.  That compares with around 0.3-0.4% at the low cost quality end.       So, they are taking around 1.1% a year more.

So, if the value you are investing multiplied by 1.1% is less than the cashback then it is viable thanks to the cashback.  (it looks like the tie in is 12 months)

Well of course it's going to be viable if the cashback covers the entire investment plus the fee!
I'm completely stumped as to why you are telling me that an absurd amount of cashback would cover the complete obliteration of their fund.

masonic

As you have used £18,950 of your ISA allowance already (and flexible withdrawals cannot be replaced into a different ISA), you are limited to £95pcm for the rest of this tax year. So you could go for the £50pcm offer. Just make sure you cash in ASAP to minimise the fees.

Clearly the complete obliteration of the fund would result in a greater loss (£700) than the cashback (£180), but this is unlikely to happen. Fees will come to less than a fiver. Losses of >25% would wipe out the cashback, again unlikely. The greatest risk is that the offer doesn't track properly or you fail to meet all of the conditions (such as not keeping up payments) and fail to receive the cashback. Even then it would only have 'cost' you a fiver, plus perhaps a little bit of investment growth.

nottsphil

masonic said:

As you have used £18,950 of your ISA allowance already (and flexible withdrawals cannot be replaced into a different ISA), you are limited to £95pcm for the rest of this tax year. So you could go for the £50pcm offer. Just make sure you cash in ASAP to minimise the fees.

Clearly the complete obliteration of the fund would result in a greater loss (£700) than the cashback (£180), but this is unlikely to happen. Fees will come to less than a fiver. Losses of >25% would wipe out the cashback, again unlikely. The greatest risk is that the offer doesn't track properly or you fail to meet all of the conditions (such as not keeping up you payments) and fail to receive the cashback. Even then it would only have 'cost' you a fiver, plus perhaps a little bit of investment growth.

That's exactly what I thought. So can you explain Dunstonh's last post? (And I don't mean the "multiplied by 1.1%" bit, which should surely be multiplied by 1.015).
How could I lose a maximum of £700 on the £600 investment you suggest? I only want to invest in limited liability concerns, so if this fund includes anything where I might be further liable, then I'm out. 
Even on a £600 investment, Dunstonh is saying that the fee would be £9.
I went for the £30 pm because of Dunstonh's first post. The cashback isn't much lower than for the £50pm.

masonic

You will not lose more than 100% of your investment, but that figure will depend on how much you commit to invest per month and how many monthly contributions you need to make until you cash it in. This will depend on the schedule of payments and how quickly they can be stopped.

On a £600 investment they'll be taking around £3 in fees as the average balance will be about half of £600, so say £300 x 1.1% (the difference between the fee you will pay and the fee you could pay elsewhere). This is much less than the cashback on offer, so dunstonh is suggesting it is viable thanks to the cashback.

nottsphil

masonic said:

You will not lose more than 100% of your investment, but that figure will depend on how much you commit to invest per month and how many monthly contributions you need to make until you cash it in. This will depend on the schedule of payments and how quickly they can be stopped.

On a £600 investment they'll be taking around £3 in fees as the average balance will be about half of £600, so say £300 x 1.1% (the difference between the fee you will pay and the fee you could pay elsewhere). This is much less than the cashback on offer, so dunstonh is suggesting it is viable thanks to the cashback.

It's just dawned on me that Dunstonh's second post was purely about the difference in fees, hence the misunderstanding in my 01:12 post this morning. By his own reckoning that would have been less than £15 on the proposed £1200 investment, so was he actually saying that it wasn't a great option simply because he didn't think the 'generous cashback' I mentioned in the OP would cover it? If so, I'm now wishing I'd gone for the £100pm one, which could have been part-funded from that old ISA.
Anybody would think I don't have the option of cashing in the whole thing after a year!