Mini Cash or OEIC ISA?

Swoxy

Told the girlfriend to start saving some money and I suggested she opened a Mini Cash ISA. She doesn't have a clue about financial stuff. Her old man got the bank manager around who opened a Scottish Widows Regular Savings OEIC Stocks and Shares ISA with a monthly investment of £350 and told her the return would be 10 - 15%. The charges include 5% of each payment that she makes as well 1.75% of the value of the fund a year. She's only 18 and wants to save the money with low risk for a deposit on a house. She's also a lower rate taxpayer so I think she'll be better off putting the £350 into a Mini Cash ISA from a high street bank at 6.5% or so. Am I right or wrong? Cheers

dunstonh

She's only 18 and wants to save the money with low risk for a deposit on a house.

If house purchase is likely to be over 5 years from now then the UT/OEIC ISA is fine.

She's also a lower rate taxpayer so I think she'll be better off putting the £350 into a Mini Cash ISA from a high street bank at 6.5% or so. Am I right or wrong?

If the ISA is using low risk funds such as corporate bonds, other bonds and fixed interest funds then they claim the tax back so there is no tax difference.

The issues here are
1 - does she want to invest the money for 5 years or more or save it?
2 - using Scottish Widows from a bank is expensive as they employ sales reps and of course it means you only get Scottish Widows funds
3 - the fact you mention one amc and one initial charge suggests all the money is going in one fund which is bad investing on an amount of £350pm. It also suggests one of the SW higher risk funds as lower risk funds tend to have lower charges. The timescale may not be appropriate for 100% into higher risk funds.

martinman3

Swoxy wrote: »

Her old man got the bank manager around who opened a Scottish Widows Regular Savings OEIC Stocks and Shares ISA with a monthly investment of £350

I assume that the rules are that she is able to close the S&S ISA within a time period with no penalty, that is she can open a different S&S ISA elsewhere in same tax year, if it is not suitable even if she has made an initial payment. Is that correct dunstonh ?

thor

Swoxy wrote: »

Her old man got the bank manager around who opened a Scottish Widows Regular Savings OEIC Stocks and Shares ISA with a monthly investment of £350 and told her the return would be 10 - 15%.

If it is a stocks and shares investment then I don't think anyone will be able to guarantee a 10 to 15% return without strings attached.

Swoxy wrote: »

She's only 18 and wants to save the money with low risk for a deposit on a house. She's also a lower rate taxpayer so I think she'll be better off putting the £350 into a Mini Cash ISA from a high street bank at 6.5% or so. Am I right or wrong? Cheers

For mid term savings you will find that most people will recommend stocks and shares over cash but not me. I don't take notice of past history and reckon that shares will stay low for an indefinite period and may never recover to pre dot.com crash levels. I believe that the stock market is still below what it was nearly 10 years ago which I would count as a mid term period. It won't be long before we get into long term and I really don't think things are going to get any better.

dunstonh

Options are not just cash or stockmarket. There is a spread of options in between.