Opening a S&S ISA and picking funds
Discussion
Hi All
Looking at sorting out my pension more so now, than ever. I have a private pension with Aviva through work 4% and 4% contribution. 7 different funds and 5 out of the 7 are Risk factor 3 and above (out of 5).
How often would you review these and make changes? (probably the million dollar question).
I have started to look at websites such as Money Observer to compare current funds and Hargreaves and Landsdown to also open a S&S ISA wrapper to complement my work private pension. I have a £2k lump sump to start and will commit £250 pm in this while maintaining £200 in the Aviva work pension.
I have read a few articles, I'm looking at investing in 3/4 funds, the article HL have for funds to watch in 2018 has made me think about investing in the 4 funds they have suggested as a starting point - https://www.hl.co.uk/funds/five-investment-ideas-2... Split equally.
Any experienced investors out there who feel this is a good starting point?
I want to retire around 55-60 if I can, but I know that's a big ask....
Looking at sorting out my pension more so now, than ever. I have a private pension with Aviva through work 4% and 4% contribution. 7 different funds and 5 out of the 7 are Risk factor 3 and above (out of 5).
How often would you review these and make changes? (probably the million dollar question).
I have started to look at websites such as Money Observer to compare current funds and Hargreaves and Landsdown to also open a S&S ISA wrapper to complement my work private pension. I have a £2k lump sump to start and will commit £250 pm in this while maintaining £200 in the Aviva work pension.
I have read a few articles, I'm looking at investing in 3/4 funds, the article HL have for funds to watch in 2018 has made me think about investing in the 4 funds they have suggested as a starting point - https://www.hl.co.uk/funds/five-investment-ideas-2... Split equally.
Any experienced investors out there who feel this is a good starting point?
I want to retire around 55-60 if I can, but I know that's a big ask....
Depending on your rate of personal tax (i.e. taxable earnings), can you contribute more to the pension?
Someone more experienced will be along soon to advise on which stocks to pick, but as someone with 11 years of equities investment behind them at £600pcm I can report that things are going as I'd hoped.
Assuming you pick a fund rather than individual shares: don't be too concerned if the market takes a tumble in the short term, as it did with me (started in 2007) because the rises thereafter will take care of things.
Someone more experienced will be along soon to advise on which stocks to pick, but as someone with 11 years of equities investment behind them at £600pcm I can report that things are going as I'd hoped.
Assuming you pick a fund rather than individual shares: don't be too concerned if the market takes a tumble in the short term, as it did with me (started in 2007) because the rises thereafter will take care of things.
As a start, read this:http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/ . I'd suggest if you consider deviating from that you should have a good understanding of your rationale.
Be careful if you pick several funds that you aren't roughly replicating a global tracker with higher fees for each of the individual funds.
If you're not after retiring earlier than say 57 (or whenever you can take your pension, it's due to gradually move up from 55) and especially if you're paying any 40% tax, look at either AVCs or a SIPP rather than an ISA - it's much better from the perspective of minimising income tax.
Be careful if you pick several funds that you aren't roughly replicating a global tracker with higher fees for each of the individual funds.
If you're not after retiring earlier than say 57 (or whenever you can take your pension, it's due to gradually move up from 55) and especially if you're paying any 40% tax, look at either AVCs or a SIPP rather than an ISA - it's much better from the perspective of minimising income tax.
As said keep fees low as possible. Once you get over £30-40k it can really make a difference which ISA provider you go with.
The early years not so much.
Also don't forget to increase your ISA contribution in line with inflation each year. Wont sound like a lot but if you are looking at 20+ years of ISA contributions (you don't say how old you are) then it will make a reasonable difference over staying with fixed payments, certainly in the later years.
The early years not so much.
Also don't forget to increase your ISA contribution in line with inflation each year. Wont sound like a lot but if you are looking at 20+ years of ISA contributions (you don't say how old you are) then it will make a reasonable difference over staying with fixed payments, certainly in the later years.
Basil Hume said:
Depending on your rate of personal tax (i.e. taxable earnings), can you contribute more to the pension?
Someone more experienced will be along soon to advise on which stocks to pick, but as someone with 11 years of equities investment behind them at £600pcm I can report that things are going as I'd hoped.
Assuming you pick a fund rather than individual shares: don't be too concerned if the market takes a tumble in the short term, as it did with me (started in 2007) because the rises thereafter will take care of things.
36 and a lower rate tax payer.Someone more experienced will be along soon to advise on which stocks to pick, but as someone with 11 years of equities investment behind them at £600pcm I can report that things are going as I'd hoped.
Assuming you pick a fund rather than individual shares: don't be too concerned if the market takes a tumble in the short term, as it did with me (started in 2007) because the rises thereafter will take care of things.
I already have a Private Pension through work - £200pm. Are you suggesting I up this instead of more in the S&S ISA ie to then benefit from tax relief as I was thinking of increasing this by another £100 pm.
Ive had a look at my latest funds in this Aviva plan and I have a few high risk ones that have performed negatively in the last year but 40-60% positive over 5 years....it has me thinking do I need to change these realistically.
xeny said:
As a start, read this:http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/ . I'd suggest if you consider deviating from that you should have a good understanding of your rationale.
Be careful if you pick several funds that you aren't roughly replicating a global tracker with higher fees for each of the individual funds.
If you're not after retiring earlier than say 57 (or whenever you can take your pension, it's due to gradually move up from 55) and especially if you're paying any 40% tax, look at either AVCs or a SIPP rather than an ISA - it's much better from the perspective of minimising income tax.
Hi isnt a S&S ISA a form of a SIPP though as id be self managing?Be careful if you pick several funds that you aren't roughly replicating a global tracker with higher fees for each of the individual funds.
If you're not after retiring earlier than say 57 (or whenever you can take your pension, it's due to gradually move up from 55) and especially if you're paying any 40% tax, look at either AVCs or a SIPP rather than an ISA - it's much better from the perspective of minimising income tax.
AVC - do you have any suggestions on a company that provide this?
I will probably not be able to retire any earlier than 60 at this rate.
red_slr said:
As said keep fees low as possible. Once you get over £30-40k it can really make a difference which ISA provider you go with.
The early years not so much.
Also don't forget to increase your ISA contribution in line with inflation each year. Wont sound like a lot but if you are looking at 20+ years of ISA contributions (you don't say how old you are) then it will make a reasonable difference over staying with fixed payments, certainly in the later years.
This is why I was probably going to go the route of Self managing ie picking funds rather than paying a management fee of 0.5% through HL.The early years not so much.
Also don't forget to increase your ISA contribution in line with inflation each year. Wont sound like a lot but if you are looking at 20+ years of ISA contributions (you don't say how old you are) then it will make a reasonable difference over staying with fixed payments, certainly in the later years.
My outlook is, any increase in my yearly income, I then add this to my pension rather than take home income, so hopefully inline with inflation or above, with my comment of increasing contributions from £200pm to £300pm being the route I want to go. Plus in April 2018 I think my company contribution goes up from 4 to 4.5%
Kingdom35 said:
Hi isnt a S&S ISA a form of a SIPP though as id be self managing?
AVC - do you have any suggestions on a company that provide this?
I will probably not be able to retire any earlier than 60 at this rate.
No an ISA isn't a form of SIPP. With a pension you get income tax refunded on contributions and you can't withdraw money until you're 55 (probably rising to 57) With an ISA there's no income tax refund on contributions but you can take money out at any time.AVC - do you have any suggestions on a company that provide this?
I will probably not be able to retire any earlier than 60 at this rate.
AVCs are additional voluntary contributions to your company scheme - less hassle for you than setting something up from scratch, often lower fees, but less choice about what you invest in than a SIPP or ISA.
If you're saving purely for retirement and are confident you won't need access until you're 60, a pension is probably a better place than an ISA for the money.
xeny said:
If you're saving purely for retirement and are confident you won't need access until you're 60, a pension is probably a better place than an ISA for the money.
Think carefully though. Once its in the SIPP you cant get it back and the goal posts may move.How many 30 somethings end up in their early 50s wishing they could just jack it in but all their money is in their pension.
If you already have a SIPP and want to save more for possible early retirement then the ISA is the next best thing. IMHO.
Yes there is no front end tax benefit but any gains are also tax free so your having to pay in taxed money but get it out tax free at the other end.
The pension is topped up at the front but you have to pay tax on anything withdrawn over your tax code upon retirement (excl the 25% LS).
Its swings and roundabouts and you can actually end up paying more tax on the pension than the tax you had to pay on the ISA PAYE money IYSWIM.
The govt are not daft!
To my mind it's a balancing act between pension and ISA - I think it's well worth using a pension if you're a 40% tax payer, but rather less clear cut if you're paying basic rate tax.
If the OP is happy tying money up until "retirement" age, then as they're they're under 40 a LISA (25% bonus on the way in, untaxed on the way out) for some money is actually the best option of the lot.
If the OP is happy tying money up until "retirement" age, then as they're they're under 40 a LISA (25% bonus on the way in, untaxed on the way out) for some money is actually the best option of the lot.
xeny said:
To my mind it's a balancing act between pension and ISA - I think it's well worth using a pension if you're a 40% tax payer, but rather less clear cut if you're paying basic rate tax.
If the OP is happy tying money up until "retirement" age, then as they're they're under 40 a LISA (25% bonus on the way in, untaxed on the way out) for some money is actually the best option of the lot.
This is my point, I'm trying to be balanced, hence increase £100 in my company pension, but have a plan with a S&S ISA so that if the goal posts do change I have some flexibility.If the OP is happy tying money up until "retirement" age, then as they're they're under 40 a LISA (25% bonus on the way in, untaxed on the way out) for some money is actually the best option of the lot.
I had thought about a LISA but for me I don't trust the aspect of me paying in for 14yrs albeit the £1k bonus each year, then having to wait until 60, a whole 10 years after I stop paying in at 50 for my money, or paying I think 6% penalty. I don't trust that the goal posts here will not change as were talking about the government here :-/ 10yrs with no investment and no control over a 70k pot that I could be investing somewhere else for 10yrs.
So I wanted the S&S ISA as an alternative but what funds to go for is the problem. More I read, the more I see 0.45% for HL is expensive, so il look elsewhere and a few suggestions are Vanguard and Cavendish so far. I would like bigger scopes of funds though so like you say its a balancing act even here.
Kingdom35 said:
This is my point, I'm trying to be balanced, hence increase £100 in my company pension, but have a plan with a S&S ISA so that if the goal posts do change I have some flexibility.
I had thought about a LISA but for me I don't trust the aspect of me paying in for 14yrs albeit the £1k bonus each year, then having to wait until 60, a whole 10 years after I stop paying in at 50 for my money, or paying I think 6% penalty. I don't trust that the goal posts here will not change as were talking about the government here :-/ 10yrs with no investment and no control over a 70k pot that I could be investing somewhere else for 10yrs.
So I wanted the S&S ISA as an alternative but what funds to go for is the problem. More I read, the more I see 0.45% for HL is expensive, so il look elsewhere and a few suggestions are Vanguard and Cavendish so far. I would like bigger scopes of funds though so like you say its a balancing act even here.
Don't forget you can change how what is in a LISA is invested, and the gov't can change the rules on ISA, Pension,LISA as they see fit.....I had thought about a LISA but for me I don't trust the aspect of me paying in for 14yrs albeit the £1k bonus each year, then having to wait until 60, a whole 10 years after I stop paying in at 50 for my money, or paying I think 6% penalty. I don't trust that the goal posts here will not change as were talking about the government here :-/ 10yrs with no investment and no control over a 70k pot that I could be investing somewhere else for 10yrs.
So I wanted the S&S ISA as an alternative but what funds to go for is the problem. More I read, the more I see 0.45% for HL is expensive, so il look elsewhere and a few suggestions are Vanguard and Cavendish so far. I would like bigger scopes of funds though so like you say its a balancing act even here.
A LISA is 25% bonus on the way in, untaxed on the way out.
For you a pension is 25% bonus on the way in (plus any employer match), 3/4 of it is taxed at your current tax rate on the way out.
An ISA is no bonus on the way in, untaxed on the way out.
Even if you decide you don't fancy a LISA at the moment, you can only open them if you're under 40, so put a few quid in one now simply so if you change your mind in your 40s (and you'll have a better idea of how the numbers are looking by then) you can put money in it at that point.
From your level of knowledge I'd think very hard about picking specific funds - they all sound like the greatest thing since sliced bread until they're not, and your money always ends up paying the management fees.
xeny said:
Don't forget you can change how what is in a LISA is invested, and the gov't can change the rules on ISA, Pension,LISA as they see fit.....
A LISA is 25% bonus on the way in, untaxed on the way out.
For you a pension is 25% bonus on the way in (plus any employer match), 3/4 of it is taxed at your current tax rate on the way out.
An ISA is no bonus on the way in, untaxed on the way out.
Even if you decide you don't fancy a LISA at the moment, you can only open them if you're under 40, so put a few quid in one now simply so if you change your mind in your 40s (and you'll have a better idea of how the numbers are looking by then) you can put money in it at that point.
From your level of knowledge I'd think very hard about picking specific funds - they all sound like the greatest thing since sliced bread until they're not, and your money always ends up paying the management fees.
That's a fair point. Can I have a Cash ISA, S&S ISA and a LISA open all at the same time? I'm fast approaching the 40yrs old so I see your point, I had thought about opening the LISA as another wrapper and if I wanted to I could divert my concentration to that at any point.A LISA is 25% bonus on the way in, untaxed on the way out.
For you a pension is 25% bonus on the way in (plus any employer match), 3/4 of it is taxed at your current tax rate on the way out.
An ISA is no bonus on the way in, untaxed on the way out.
Even if you decide you don't fancy a LISA at the moment, you can only open them if you're under 40, so put a few quid in one now simply so if you change your mind in your 40s (and you'll have a better idea of how the numbers are looking by then) you can put money in it at that point.
From your level of knowledge I'd think very hard about picking specific funds - they all sound like the greatest thing since sliced bread until they're not, and your money always ends up paying the management fees.
From https://www.moneysavingexpert.com/savings/lifetime...
"The overall ISA limit is £20,000 in the 2017/18 tax year. You are allowed to split this between a LISA (up to the maximum £4,000) and put the remainder in a cash ISA, stocks & shares ISA and/or an innovative finance ISA (for peer-to-peer investing) in the same tax year. "
"The overall ISA limit is £20,000 in the 2017/18 tax year. You are allowed to split this between a LISA (up to the maximum £4,000) and put the remainder in a cash ISA, stocks & shares ISA and/or an innovative finance ISA (for peer-to-peer investing) in the same tax year. "
xeny said:
From https://www.moneysavingexpert.com/savings/lifetime...
"The overall ISA limit is £20,000 in the 2017/18 tax year. You are allowed to split this between a LISA (up to the maximum £4,000) and put the remainder in a cash ISA, stocks & shares ISA and/or an innovative finance ISA (for peer-to-peer investing) in the same tax year. "
Thank you, that is very helpful."The overall ISA limit is £20,000 in the 2017/18 tax year. You are allowed to split this between a LISA (up to the maximum £4,000) and put the remainder in a cash ISA, stocks & shares ISA and/or an innovative finance ISA (for peer-to-peer investing) in the same tax year. "
Looks like I'm about to start an adventure....fingers crossed. I may start with some managed funds like my Aviva just to coast me in :-)
Mini thread hijack but maybe of use to the op so ill ask here.
I also want to start a s&s isa. Biggest problem being i haven't a clue what I'm investing in at all in the slightest
i may as well pick them out of a hat.
Am i wise to go with something like the hargreaves lansdown s&s isa which they manage the funds for me? Seems easy enough but is that my best option?
I also want to start a s&s isa. Biggest problem being i haven't a clue what I'm investing in at all in the slightest
i may as well pick them out of a hat.Am i wise to go with something like the hargreaves lansdown s&s isa which they manage the funds for me? Seems easy enough but is that my best option?
If you're in a hurry read the monevator link I gave further up the thread. If you've got time read something like :Smarter Investing:.
Later once you've some idea what you're doing, then try and pick funds, if you feel you must, but keep in mind that very roughly speaking, equities return ~8-9% a year on average (and it's a very variable average), so maybe 6% after CPI inflation. Minimising the fraction of that return that goes in fees is a good start to maximising your actual return.
Later once you've some idea what you're doing, then try and pick funds, if you feel you must, but keep in mind that very roughly speaking, equities return ~8-9% a year on average (and it's a very variable average), so maybe 6% after CPI inflation. Minimising the fraction of that return that goes in fees is a good start to maximising your actual return.
m3jappa said:
Mini thread hijack but maybe of use to the op so ill ask here.
I also want to start a s&s isa. Biggest problem being i haven't a clue what I'm investing in at all in the slightest i may as well pick them out of a hat.
Am i wise to go with something like the hargreaves lansdown s&s isa which they manage the funds for me? Seems easy enough but is that my best option?
Spend some time doing homework.I also want to start a s&s isa. Biggest problem being i haven't a clue what I'm investing in at all in the slightest
i may as well pick them out of a hat.Am i wise to go with something like the hargreaves lansdown s&s isa which they manage the funds for me? Seems easy enough but is that my best option?
A few hours now can be literally tens of thousands gained over the years.
I'm in a similar position but it does soon start to make sense
General advice (I work in IT so take this with that caveat) is- Work out your risk profile i.e. you don't just get 20% without taking a massive risk.
- Diversify
- Don't think you personally can beat the market (google Active v Passive)
- Look at fees
- Work out your balance of equities:bonds/cash which ties into risk i.e. if you're close to retirement you probably don't want the risk of losing 30% overnight when there's no time for it to recover
- Work out how often you're likely to add money as it impacts fees i.e. some ISA providers charge a % some charge per transaction so it costs more or less if you make a single "dump" of money a year into the ISA vs. if you add an amount every week/month/quarter etc.
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hstewie said:
hstewie said: Spend some time doing homework.
It's IMO worth taking a look at this recent guidance from one of the serious players,https://www.fidelity.co.uk/markets-insights/invest...
You can get the gist of it in the first 10 minutes or so.
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