All in S+S isa or cash and S+S isa

gav160

hi my FA has me paying in my full isa allowance into a S+S fund with low/medium risk, however i was thinking is it safer/better to have equal amounts in cash and S+S isa?

i know i should talk to my FA but i was just wondering what you guys thought?


ty

Aegis

Personally I think it's worth using at least some of your cash ISA allowance unless you're planning on investing a huge sum in assets that are likely to see a lot of growth. The tax-free status makes for a very good home for your cash assets (i.e. your rainy day fund), and it might be very useful because it shelters some of your assets from affecting your benefits for certain situations.

All in all it depends on your attitude though. If you prefer to invest and don't plan on making much out of cash assets, then you might feel that the tax-free cash is less useful to you than the tax-free shares.

turbobob

If you've been investing £7000 (now £7200) a year into one fund I'd certainly question the advice. I think most would suggest spreading that sort of money into several funds to make a balanced portfolio, and not just put it all in one. Out of interest what fund is it?

Cash ISA's have no capital risk, but most things that you invest in through a Stocks and Shares ISA do. Historically, stocks and shares have produced better returns than cash deposits in the long term. You need to think about the effects of inflation if you are investing in cash over a long term. A cash ISA would likely to be more suitable if you intend to invest over a shorter term (below 5 years really). Also something to bear in mind is that under current ISA rules cash ISA's can be transferred to a S&S ISA at a later date (it doesn't work the other way though).

Thats about as generic an answer as I can give anyway. What's "better" will depend on your circumstances. Details of your attitude to risk, how long you intend to invest the money for and so on will probably get you more specific answers.

Red_Cat

Good work Turbobob,

I think it boils down to two things:
1. Your attitude to risk
2. Your current portfolio (assuming you subscribe to the balanced portfolio school of thought)

earlgrey_3

gav160 wrote: »

hi my FA has me paying in my full isa allowance into a S+S fund with low/medium risk, however i was thinking is it safer/better to have equal amounts in cash and S+S isa?

i know i should talk to my FA but i was just wondering what you guys thought?

All interest on your cash ISA would be 100% tax-free. Cash in a S&S ISA will be subject to tax as will any dividends - although you won't be liable to pay the higher rate if you're a higher-rate tax payer. You won't be liable to CGT if you make large gains but then you have a CGT tax-free allowance of £9600 pa anyway. As Turbobob points out you can transfer cash from the cash ISA to the S&S ISA but not the other way around.

So it really depends on your tax position now and in the future whether a S&S ISA is of any benefit to you and on your attitude to risk. A cash ISA benefits anyone who pays tax.

The FA will get commision on the S&S ISA but not on the cash ISA so it might be worthwhile to have him justify his recommendation to judge how reliable he is at looking after your interests.

dunstonh

fixed interest funds/bonds are able to claim the tax back in an ISA. So, it you are utilising these lower risk funds, then fully using the investment side is fine.

gav160

thanks to everyone for the help,

im in the 40% tax band, and this is my fist year im investing in isa's as i just recently graduated, im planning to buy a home in the next 3-4 years, thats my current situation,

im currently with halifax, who's FA gave me the advice on putting all my allowance in the S+S cautious/medium fund.


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jem16

gav160 wrote: »

thanks to everyone for the help,

im in the 40% tax band, and this is my fist year im investing in isa's as i just recently graduated, im planning to buy a home in the next 3-4 years, thats my current situation,

If you are planning on using the S&S ISA to buy your home, I would forget about it and use a cash ISA. 3/4 years is too short for investing - it needs to be at least 5 years.

m currently with halifax, who's FA gave me the advice on putting all my allowance in the S+S cautious/medium fund.

:eek: Typical "advice" from a tied salesman from a bank. In a few years they will not be able to use the term adviser. Halifax's investment products are rubbish - stay well away.

If you really want to invest find yourself a proper IFA ( Independent Financial Adviser) but as I said 3/4 years is too short and makes any investment higher risk.

dunstonh

jem says everything that is needed to be said. You have been mis-sold due to timescale. And getting advice from an insurance rep with only a limited range of funds (which are rubbish) is not the way to get advice. Thankfully, banks wont be able to give advice for much longer if proposals go ahead.