Which funds to keep in ISA?
Discussion
I have a stocks and shares ISA and a general account each with a tidy (for me) sum in them.
Through a quirk of how I've used ISA allowances and what may just be stupidity on my part the ISA contains the more cautious funds and the unwrapped account contains the equity funds.
Right now things like CGT aren't vaguely an issue but I'm in this for the long term so hopefully at some point they may be.
Also the equity funds are back in the black after the recent market turbulence.
I know it's not always black and white but broadly speaking would it make sense to sell the equity funds that are in the unwrapped account and to move them into the ISA and use the unwrapped account for the cautious funds that won't grow anything like the others hopefully will?
There are some funds and some investment trusts so I can't bed and isa everything and if I repurchased the same investment trusts I'd have stamp duty to pay again.
Through a quirk of how I've used ISA allowances and what may just be stupidity on my part the ISA contains the more cautious funds and the unwrapped account contains the equity funds.
Right now things like CGT aren't vaguely an issue but I'm in this for the long term so hopefully at some point they may be.
Also the equity funds are back in the black after the recent market turbulence.
I know it's not always black and white but broadly speaking would it make sense to sell the equity funds that are in the unwrapped account and to move them into the ISA and use the unwrapped account for the cautious funds that won't grow anything like the others hopefully will?
There are some funds and some investment trusts so I can't bed and isa everything and if I repurchased the same investment trusts I'd have stamp duty to pay again.
Is there a difference in what you want the money in each to do? If not, why aren't the objectives the same for both? If the GIA is holding your emergency money then maybe it should be in "safer" funds, or even cash, but if it's just money you have over after the ISA contributions then why not invest it in the same way as the ISA (unless the GIA investments are different for tax reasons).
Mr Pointy said:
Is there a difference in what you want the money in each to do? If not, why aren't the objectives the same for both? If the GIA is holding your emergency money then maybe it should be in "safer" funds, or even cash, but if it's just money you have over after the ISA contributions then why not invest it in the same way as the ISA (unless the GIA investments are different for tax reasons).
Not especially it's just the way it's panned out.The overall asset allocation is about where I want it to be it just feels like the growth stuff is in the wrong bin.
So to use an example if my total pot was 75% LifeStrategy 60 and 25% Fundsmith the Fundsmith is all in the unwrapped pot.
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hstewie said:
hstewie said: would it make sense to sell the equity funds that are in the unwrapped account and to move them into the ISA and use the unwrapped account for the cautious funds that won't grow anything like the others hopefully will?
Yes, that's the way to do it. Long term, tax free returns in ISA can compound very nicely indeed. (The only theoretical downside is that losses in an ISA are not "allowable" for CGT purposes, but that probably doesn't matter in practice.)JulianPH said:
Don't forget that the lower risk funds (presumably bond based) may have a much higher element of income than your equities pay.
The annual GCT allowance could currently shield you from any tax, but you would still have income tax to pay on any bond coupons.
They're Troy Trojan or LS40 type funds so typical yield of 1% whilst the trusts I'm in seem to yield a little higher though I'm not in any of them for yield specifically.The annual GCT allowance could currently shield you from any tax, but you would still have income tax to pay on any bond coupons.
They're all popular off the shelf investment trusts or open ended funds nothing weird in financial terms.
bhstewie said:
hstewie said: They're Troy Trojan or LS40 type funds so typical yield of 1% whilst the trusts I'm in seem to yield a little higher though I'm not in any of them for yield specifically.
They're all popular off the shelf investment trusts or open ended funds nothing weird in financial terms.
Sounds covered then.They're all popular off the shelf investment trusts or open ended funds nothing weird in financial terms.
I agree with Mr Pointy that you should establish your overall portfolio of choice and hold this across all your accounts (ISA/SIPP/GIA) in the same way (unless of course you have different objectives for different money).
JulianPH said:
Sounds covered then.
I agree with Mr Pointy that you should establish your overall portfolio of choice and hold this across all your accounts (ISA/SIPP/GIA) in the same way (unless of course you have different objectives for different money).
How in practise though?I agree with Mr Pointy that you should establish your overall portfolio of choice and hold this across all your accounts (ISA/SIPP/GIA) in the same way (unless of course you have different objectives for different money).
Let's say you want to be 80% Trojan and 20% Fundsmith overall and your ISA and GIA are equal sizes.
Would you literally go 80/20 in each pot?
That's where the original question came from as I'd have thought it's preferable to have more/all of what should be the racier fund(s) in the ISA?
Appreciate we're speaking in general terms so not expecting a 100% specific answer.
JulianPH said:
...unless of course you have different objectives for different money.
Which, I think, many people will have.The UK tax system can often lead people in the direction of keeping the most tax advantaged assets for the longest time. So you might decide to run with,
- Longest term investments in SIPP
- Medium/long term investment in ISA
- Short term investments in a general investment account. (While keeping CGT and income tax carefully managed)
Over the long term careful juggling of tax wrappers, tax rates and investment returns can be incredibly beneficial.
The ideal balance may change quite significantly from time to time with legislative changes. For instance, under New Labour, income and gains were all charged at the same marginal rates of tax. Today dividends carry no tax credit but capital gains on investments are taxed at relatively low rates.
bhstewie said:
hstewie said: Would you literally go 80/20 in each pot?
I wouldn't. I'd make specific decisions about what to hold where. amongst other things this suppresses the amount of administration you need to track.The only time I'd expect to see the same investment in two accounts is during, say, a "Bed and ISA" phase for someone who's already fully invested. In other words, they have no free cash available to put into ISA but assets are sitting in a general investment account - so move £20k across into ISA each year.
No doubt other people may prefer a different approach.
rockin said:
I wouldn't. I'd make specific decisions about what to hold where. amongst other things this suppresses the amount of administration you need to track.
The only time I'd expect to see the same investment in two accounts is during, say, a "Bed and ISA" phase for someone who's already fully invested. In other words, they have no free cash available to put into ISA but assets are sitting in a general investment account - so move £20k across into ISA each year.
No doubt other people may prefer a different approach.
Which is kind of how I ended up where I am.The only time I'd expect to see the same investment in two accounts is during, say, a "Bed and ISA" phase for someone who's already fully invested. In other words, they have no free cash available to put into ISA but assets are sitting in a general investment account - so move £20k across into ISA each year.
No doubt other people may prefer a different approach.
Don't get me wrong it's a very first world problem but now things are in the black (just about) for the first time in the new ISA year it seems a sensible time to ask.
rockin said:
Which, I think, many people will have.
The UK tax system can often lead people in the direction of keeping the most tax advantaged assets for the longest time. So you might decide to run with,
Over the long term careful juggling of tax wrappers, tax rates and investment returns can be incredibly beneficial.
The ideal balance may change quite significantly from time to time with legislative changes. For instance, under New Labour, income and gains were all charged at the same marginal rates of tax. Today dividends carry no tax credit but capital gains on investments are taxed at relatively low rates.
But surely if you're talking beyond a certain timeframe (& that number could be up for discussion) everything becomes the same? Once you're talking 10 years ahead there's no difference between how you want your SIPP, ISA & GIA to perform - it's just guided by your appetite for risk.The UK tax system can often lead people in the direction of keeping the most tax advantaged assets for the longest time. So you might decide to run with,
- Longest term investments in SIPP
- Medium/long term investment in ISA
- Short term investments in a general investment account. (While keeping CGT and income tax carefully managed)
Over the long term careful juggling of tax wrappers, tax rates and investment returns can be incredibly beneficial.
The ideal balance may change quite significantly from time to time with legislative changes. For instance, under New Labour, income and gains were all charged at the same marginal rates of tax. Today dividends carry no tax credit but capital gains on investments are taxed at relatively low rates.
They are just different tax wrappers & the allocation is driven by the rules; you can't get at the SIPP until you are 55 & there's a limit to what you can put in, you can't put more than £20k into the ISA. If you could you'd put all the GIA money into the ISA. It might be different if you had a specific use for the money; say you wanted to move house in five year's time you might adopt a different risk profile but that's not the issue here.
Maybe you're talikng about more advanced types of funds & investments?
My point was that if at the age of, say, 48 you want cash quickly from the sale of investments to buy a car you won't be getting it out of your SIPP (too young), it would be a shame to be getting it out of your ISA (disrupting the long term, tax free compounding) so if you have a general investment account with no tax advantages that's generally the one to raid first.
In addition it makes sense to me to have "higher return" investments (traditionally equities) in the best tax wrappers in order to maximise the benefit of tax free compounding. This is significant in an ISA and particularly significant in a SIPP where investors are getting tax free compound returns on tax relief (free money from the government) as well as on the cash they put in themselves.
In addition it makes sense to me to have "higher return" investments (traditionally equities) in the best tax wrappers in order to maximise the benefit of tax free compounding. This is significant in an ISA and particularly significant in a SIPP where investors are getting tax free compound returns on tax relief (free money from the government) as well as on the cash they put in themselves.
rockin said:
My point was that if at the age of, say, 48 you want cash quickly from the sale of investments to buy a car you won't be getting it out of your SIPP (too young), it would be a shame to be getting it out of your ISA (disrupting the long term, tax free compounding) so if you have a general investment account with no tax advantages that's generally the one to raid first.
In addition it makes sense to me to have "higher return" investments (traditionally equities) in the best tax wrappers in order to maximise the benefit of tax free compounding. This is significant in an ISA and particularly significant in a SIPP where investors are getting tax free compound returns on tax relief (free money from the government) as well as on the cash they put in themselves.
Well then surely you want your GIA money working the hardest (ie highest risk) as it isn't getting the tax benefits of the SIPP & ISA? It needs to be taking more risks to keep up. CGT reduction needs attention of course. In addition it makes sense to me to have "higher return" investments (traditionally equities) in the best tax wrappers in order to maximise the benefit of tax free compounding. This is significant in an ISA and particularly significant in a SIPP where investors are getting tax free compound returns on tax relief (free money from the government) as well as on the cash they put in themselves.
I think the last couple of exchanges highlight that perhaps there isn't a right answer 
In my case what I intend to do is have the ISA as the long term pot which I have no intention of withdrawing from and the GIA is the pot that I hope not to withdraw from but as I have too much cash it has to go somewhere other than the bank and that's the GIA.
So the GIA struck me as the place for the more cautious investments as it's the piggy bank I'd raid first if I ever needed to raid either of them.
In my case what I intend to do is have the ISA as the long term pot which I have no intention of withdrawing from and the GIA is the pot that I hope not to withdraw from but as I have too much cash it has to go somewhere other than the bank and that's the GIA.
So the GIA struck me as the place for the more cautious investments as it's the piggy bank I'd raid first if I ever needed to raid either of them.
Mr Pointy said:
Well then surely you want your GIA money working the hardest (ie highest risk) as it isn't getting the tax benefits of the SIPP & ISA? It needs to be taking more risks to keep up. CGT reduction needs attention of course.
It's all personal taste. To my mind the beauty of "compounding" is its self-multiplication, and the more multiplication that goes on tax free the happier I am. Ideally you'd want all of your money "working the hardest" but that means running high risk right across the board. I like to have at least part of the picture a bit less risky. Hence I carry any cash outside the wrappers and like to have the lower risk/return investments closer to home as well. The higher the investment return the more you benefit from being in a tax free environment.
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