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....
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%
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.
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.
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 :-)
mcbook said:
This thread prompted me to do something, rather than think about doing something, with my savings.
I used to be quite an active diy investor (small-time £) and kept telling myself to pick some shares and get going again. However, busy work and family life mean I just haven't had the time.
I decided that today was the day and rather than spend time researching shares I've just gone with a fund. I've opened an ISA with vanguard, putting all my eggs in the one basket: FTSE All-World High Dividend Yield UCITS ETF (VHYL).
Vanuguard fees are 0.15% (account fee) plus 0.29% (fund fee). A straight forward FTSE100 tracker has a much cheaper fee at 0.06% but I wanted something a bit more exotic. We'll see how it works out. Feels good to have finally pulled the trigger.
For excitement, I've also got a small amount in crypto currency but that's more of a gamble than an investment ;-)
Thanks for the inspiration, OP.
Looks interesting :-) Not sure I'm that brave, heavily reliant on the US Markets....but from what ive seen from that Angle Mr Trump Is looking after his own with a few legislation changes so every hope.I used to be quite an active diy investor (small-time £) and kept telling myself to pick some shares and get going again. However, busy work and family life mean I just haven't had the time.
I decided that today was the day and rather than spend time researching shares I've just gone with a fund. I've opened an ISA with vanguard, putting all my eggs in the one basket: FTSE All-World High Dividend Yield UCITS ETF (VHYL).
Vanuguard fees are 0.15% (account fee) plus 0.29% (fund fee). A straight forward FTSE100 tracker has a much cheaper fee at 0.06% but I wanted something a bit more exotic. We'll see how it works out. Feels good to have finally pulled the trigger.
For excitement, I've also got a small amount in crypto currency but that's more of a gamble than an investment ;-)
Thanks for the inspiration, OP.
I have a question all...can you go for a managed fund then add in a few funds in addition that you've chosen yourself? Sort of a mix/match?
b
hstewie said:
hstewie said: Yes with another "it depends" caveat in that you need to have a platform that allows it.
Random example but let's say you want the Fundsmith fund.
You can go to https://www.fundsmith.co.uk/ and invest directly with or without an ISA wrapper.
If you invest with them directly you can't buy other funds through them.
Now if you've invested directly and you are using an ISA wrapper you can't go and open another ISA in the same year.
If you've invested directly and you are not using an ISA wrapper you can go somewhere else and invest in whatever you like.
Hope that makes sense, basically mix/match is easy just use a platform that offers the choice.
I see so the question here then is, I want to open an S&S ISA, do any other companies offer the Fundsmith Fund ie do Vanguard, Cavendish etc and if they did, could I pick say the Vanguard Lifestrategy then add on Fundsmith in addition to this fund? Or would it be deemed 2 ISA's as it has to be separate or even a non-ISA and an independent/taxed investement if I had the Vanguard as the ISA and Fundsmith separate (as I had to)....:-/Random example but let's say you want the Fundsmith fund.
You can go to https://www.fundsmith.co.uk/ and invest directly with or without an ISA wrapper.
If you invest with them directly you can't buy other funds through them.
Now if you've invested directly and you are using an ISA wrapper you can't go and open another ISA in the same year.
If you've invested directly and you are not using an ISA wrapper you can go somewhere else and invest in whatever you like.
Hope that makes sense, basically mix/match is easy just use a platform that offers the choice.
bhstewie said:
hstewie said: I'm about to do the same albeit different funds.
So process is open the ISA for 2016/17 tax year through Cavendish (for example).
You can put in any mix of funds you like up to the £20k.
Cavendish will charge 0.25% on the portfolio for a platform/management fee.
Each fund will charge its own OCF/TER.
In April when it's the 2017/18 tax year you can keep using Cavendish or you can go open another ISA somewhere else but you can only put money into one of them during the 2017/18 tax year.
Think of the ISA as the shopping bag and it doesn't matter which funds you fill the bag with up to the ISA limit and each year the shopping bag can be from any supermarket but you can only put new money for that year in that years bag.
I see ok so ive got a lump sum of £2000, I could open the Fundsmith Fund before April, then pile in a few monthly contributions there. Then come April I can go and get a Managed Vanguard LifeStrategy Managed Fund and pile some in there and the monthly? I see M&S (Fundsmith) Shopping bag before April, Tesco (Vanguard) Shopping Bag thereafter? So process is open the ISA for 2016/17 tax year through Cavendish (for example).
You can put in any mix of funds you like up to the £20k.
Cavendish will charge 0.25% on the portfolio for a platform/management fee.
Each fund will charge its own OCF/TER.
In April when it's the 2017/18 tax year you can keep using Cavendish or you can go open another ISA somewhere else but you can only put money into one of them during the 2017/18 tax year.
Think of the ISA as the shopping bag and it doesn't matter which funds you fill the bag with up to the ISA limit and each year the shopping bag can be from any supermarket but you can only put new money for that year in that years bag.
bhstewie said:
hstewie said: I think you're confusing the fund with the platform.
Fundsmith is a fund.
LifeStrategy is a fund.
Cavendish is a platform provider.
You can buy Fundsmith and LifeStrategy directly or through a platform provider.
If you buy directly you can only buy Fundsmith or Vanguard products because that's all they sell as you've gone direct.
If you go with Cavendish (there are loads, that's my example) you can buy whatever you like subject to the ISA limits.
What you can't do is contribute to multiple ISA's in the same tax year.
So you could do exactly what you said, or you could open an ISA with someone like Cavendish and add £1000 of Fundsmith, £1000 or LifeStrategy, and if you want to add monthly you can do so in whatever order/ratio/mix you want.
Sorry I was on the same page as you. Fundsmith is a fund.
LifeStrategy is a fund.
Cavendish is a platform provider.
You can buy Fundsmith and LifeStrategy directly or through a platform provider.
If you buy directly you can only buy Fundsmith or Vanguard products because that's all they sell as you've gone direct.
If you go with Cavendish (there are loads, that's my example) you can buy whatever you like subject to the ISA limits.
What you can't do is contribute to multiple ISA's in the same tax year.
So you could do exactly what you said, or you could open an ISA with someone like Cavendish and add £1000 of Fundsmith, £1000 or LifeStrategy, and if you want to add monthly you can do so in whatever order/ratio/mix you want.
So what I'm thinking is Fundsmith direct and contribute until the end of March.
Then open a Vanguard LifeStrat for that financial year, leaving Fundsmith be.
If Cavendish offered both then I could combine both for less hassle and more contribution but then wouldn't I be paying more? In fees etc?
bhstewie said:
hstewie said: Maybe a little, it depends on the flexibility you want.
Remember that @ 0.25% v 0.15% you're more or less talking sod all initially.
Worth a look http://monevator.com/compare-uk-cheapest-online-br...
Just had a look Cavendish offer the Fundsmith Fund but the charges are 1.25% compared to just 0.9% direct.Remember that @ 0.25% v 0.15% you're more or less talking sod all initially.
Worth a look http://monevator.com/compare-uk-cheapest-online-br...
H&L offer it also for just under 1%.
I wanted to go with Vanguard but I don't think they offer it but il call them to find out, as I wanted to go for their low fees.
Makes sense though as then I can contribute to both, rather than faff around moving about each tax year or hoping that the fund becomes available.
Thanks all really helpful.
bhstewie said:
hstewie said: Where are you looking as I'm seeing 0.96% on that?
Adding in Cavendish Fees as well?The problem I have right now is, the managed funds side of the ISA's are all 2/3 times more than Vanguard. H&L, Cavendish and Fidelity have the Fundsmith Fund but theyre fees are a lot higher than Vanguard for the managed funds side.
A bit of a headache. Going to ring Vanguard and hope they have the Fundsmith Fund :-)
bhstewie said:
hstewie said: Vanguard only offer Vanguard - that's why their platform fee is so cheap 
Remember that published fund returns are usually net so are after the fund management fees i.e. if a fund publishes that it returned 20% last year they returned 20% regardless of whether the fund management fee is 0.2% or 2% if that makes sense.
That makes sense now thank you, appreciate that explanation :-)Remember that published fund returns are usually net so are after the fund management fees i.e. if a fund publishes that it returned 20% last year they returned 20% regardless of whether the fund management fee is 0.2% or 2% if that makes sense.
xeny said:
AFAIK, Cavendish fees are .25%. Vanguard are .15%. Vanguard won't carry Fundsmith.
Called Cavendish, theyre model portfolio is basically self managed. Its 0.25% and the guy said you can go with what they suggest or mix it up. Am I being naïve and thinking the only managed part is the initial portfolio they suggest? I think my brain is frazzled.
What would Vanguard do any different compared to Cavendish, ie Model Portfolio at Cavendish with me adding in Fundsmith or Vanguard Life Strategy and no Fundsmith.
xeny said:
Do you have a link for this Cavendish managed portfolio?
What do you mean by "do any different" I thought you were looking for an execution only broker to hold some funds you picked (I got the impression a Vangaurd tracker of some sort and Fundsmith)?
Hi no I'm looking for a company to model a portfolio to my needs. Like the next post...this is the link - Medium Risk - https://www.cavendishonline.co.uk/investments/fund...What do you mean by "do any different" I thought you were looking for an execution only broker to hold some funds you picked (I got the impression a Vangaurd tracker of some sort and Fundsmith)?
bhstewie said:
hstewie said: My guess is here and the "Managed Portfolios" tab https://www.cavendishonline.co.uk/investments/fund...
Yes this Medium Risk - Growth.My point is, I must be confusing myself but is it a case that these funds within will stay the same and the make up of each fund just changes....they wont pull out of a fund if its performing poorly and then re-direct me to another fund will they? So in essence il be in the same funds from day 1...when would they ever make any changes? Apart from the makeup of each fund!
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