S&S ISA - Advised to move from cash ISA

Groover24

I have a sum of money inherited that is in fiexed cash ISAs. My financial advisor has suggested that I have more than enough cash for emergencies and that I can get a better return on my money if it is invested in an S&S ISA - in this case Fundment.

I am aware that anything stockmarket related can enjoy considerable gains, but also losses.

Questions:

1. Can I transfer the cash ISA at any time or do I need to wait until it matures?
2. I have some of my 2025/26 ISA allowance left so would it be better using that first an getting a feel for the S&S ISA?
3. Would it be then better to "drip feed" the ISA to even out ups and downs?
4. I am thinking of retiring in about 5 to 7 years so is this a suitable timeframe for an ISA to give reasonable returns?

I understand that my advisor is looking to maximise returns on my monies, but I am just a little cautious with this as opposed to my pensions

Albermarle

Groover24 said:

I have a sum of money inherited that is in fiexed cash ISAs. My financial advisor has suggested that I have more than enough cash for emergencies and that I can get a better return on my money if it is invested in an S&S ISA - in this case Fundment.
Historically you should get a better return from investments in the long term. However how much cash you should hold will be a matter of debate/different opinions.

I am aware that anything stockmarket related can enjoy considerable gains, but also losses. If you stick to mainstream diversified investments then the very long term trend has always been up. 

Questions:

1. Can I transfer the cash ISA at any time or do I need to wait until it matures? Normally you are best  to wait until the fixed term ends. If you transfer out before then there will be a penalty.
2. I have some of my 2025/26 ISA allowance left so would it be better using that first an getting a feel for the S&S ISA? You could do.
3. Would it be then better to "drip feed" the ISA to even out ups and downs? Statistically no, but for peace of mind maybe yes.
4. I am thinking of retiring in about 5 to 7 years so is this a suitable timeframe for an ISA to give reasonable returns? 10 years is better, but when you retire you are presumably not going to spend all the money immediately?

I understand that my advisor is looking to maximise returns on my monies, but I am just a little cautious with this as opposed to my pensions

Presume you have an advisor, because of your pensions already being invested?
From an investment risk point of view, it is the same for pensions and S&S ISA ( presuming they are invested in the same things. Only the tax treatment is different.

dunstonh

1. Would it be then better to "drip feed" the ISA to even out ups and downs?

Statistically, phasing results in lower returns in the majority of periods.

I am aware that anything stockmarket related can enjoy considerable gains, but also losses.

It is unlikely that your adviser would be going 100% stockmarket.  Risk is not on or off.  It is a sliding scale.  Even cash savings has risks.  Cash may not have investment risk, but it gives you shortfall risk and inflation risk.   100% stockmarket is at the other end of the scale, but the investments will likely sit in between.  

1. I am thinking of retiring in about 5 to 7 years so is this a suitable timeframe for an ISA to give reasonable returns?

Your retirement date is largely irrelevant.   Your spending dates are what are important.   Are you planning to spend all the money in the ISA in 5-7 years time?

I understand that my advisor is looking to maximise returns on my monies, but I am just a little cautious with this as opposed to my pensions

Pensions and ISAs share the same investment options at the same cost.    So, it shouldnt really make any difference other than when you are accessing the money along with your risk profile (including capacity for loss and behavioural risk).

in this case Fundment.

My favourite platform.  It is where I have mine.

Groover24

1. I am thinking of retiring in about 5 to 7 years so is this a suitable timeframe for an ISA to give reasonable returns?

Your retirement date is largely irrelevant.   Your spending dates are what are important.   Are you planning to spend all the money in the ISA in 5-7 years time?

In terms of spending I have no idea yet what I will do once I get to retirement - there are no plans for big holidays, etc.

I think that I was thinking more in terms of if there is a dip in the value of the investment, how long would be a reasonable time to expect the value to recover and make some ground? If I have easy access savings and cash ISA  then the S&S can sit and wait. 

Albermarle

Groover24 said:

1. I am thinking of retiring in about 5 to 7 years so is this a suitable timeframe for an ISA to give reasonable returns?

Your retirement date is largely irrelevant.   Your spending dates are what are important.   Are you planning to spend all the money in the ISA in 5-7 years time?

In terms of spending I have no idea yet what I will do once I get to retirement - there are no plans for big holidays, etc.

I think that I was thinking more in terms of if there is a dip in the value of the investment, how long would be a reasonable time to expect the value to recover and make some ground? If I have easy access savings and cash ISA  then the S&S can sit and wait. 

Well there are  'dips' all the time, but I guess you are thinking about major drops of >20% or double that.
Recovery time can vary a lot . The Covid drop recovered in about 6 months, whilst the dot.com crash took years to recover, but that was a big crash. I think most people like to keep at least a couple of years expenditure in cash to cover most eventualities. Also your advisor will probably be converting some of your pension to cash when you get closer to starting withdrawing it.
However as mentioned already it is unlikely that you will be invested 100% in equities in your S&S ISA or your pension. More typical would be about 60% at your age, so you would not feel the full brunt of any crash.

dunstonh

In terms of spending I have no idea yet what I will do once I get to retirement - there are no plans for big holidays, etc.

Its time for you to start thinking about it.    Even if its just identifying what your base income level will need to be and how much of your money will be needed to provide that.     Knowing that will let you know how much you have left over and how much needs to be retained and what level of investment risk will be sensible (cash only would be unsuitable but 100% equities equally so).

I think that I was thinking more in terms of if there is a dip in the value of the investment, how long would be a reasonable time to expect the value to recover and make some ground?

The majority of crashes recover within 12 months.  It's mainly the rarer extreme ones that take longer.  e.g., the early part of the millennium with the dot.com crash (and other events), the credit crunch in 2008.      Coronavirus was the third largest fall in the last 25 years but it recovered in under 5 months.    There was a technical stockmarket crash earlier this year due to the Trump tarrifs and trade war escalation.  1 in 4 years has a crash on average

 If I have easy access savings and cash ISA  then the S&S can sit and wait. 

Which is how things normally work.   You never invest everything.  You retain an emergency fund and anything you need to spend in the next 5 years.

Eyeful

Groover24 
1. Do you know if your financial advisor is an Independent Financial Advisor (IFA) or a Restricted Advisor?

2. How long have you been with them?   

3. As you are approaching retirement suggest you look into "Sequence of Risk"

The following video should help. 

https://www.youtube.com/watch?v=DbuJ9xbsoZs