Year end. ISAs

[Justin Passing]

Reminder.
This is my knowledge/opinion, not "financial advice". It may not be 100% correct or best for you, but find out or maybe lose out.
Interest and dividends and capital gains made in ISAs is tax free. Hold as much as you like in an ISA, but you can only add £20k a year, which goes to/from April 5th. There are rules.

If you've had 20k unused for a year you could have had it in a
current account earning 6% or so, taxable
ISA earning a little less, but not taxable. Say 5%
Then there are "Stocks and shares ISAs". A little confusing because for Savings, they can vary in what you can put the money in , once it's in the S&S ISA.
a) Shares, say in Apple, Rolls Royce, etc. Some shares do well, very predictably on the short term.
.___eg NVDA 242% 1 year to date, Rolls Royce 194% .

b) ETFs, ETPs, Mutiual Funds (etc) such as an index tracker. Almost any Index, like FTSE 100, FTSE 250, NASDAQ 100, Indian index. Then some will have things like German DAX x3 , or FTSE100 x3, or S&P500 x minus 2. Many have just company name attached , like Vanguard S&P 500, or iShares TechnologyIndex. That last one I invented but it would be tracking the technology sector shares in the US, maybe the top 100 on the NASDAQ exchange.
3xNVidia. 3xRolls Royce, three times the above figures. 3x German whole DAX Index, 68% in the last 6 months. 5.51% in the last week (ie that's a whole year in the Halifax...).
A boring but doing-ok one S&P 500. It's companies doing well enough to be in the top 500, across all sectors. Very popular.

c) Managed funds. These are typically what you find in more established providers like banks (and pensions), they have names like Jupiter India, L&G Artemis Equity, abrdn enhanced technology. You have little idea where the money goes unless you look in to it (easy but time consuming).
The more Managed a fund is, the higher the charge will be, like an extra 1%. It should be worth the extra. For example Jupiter India returned 65% one year to date, where a typical Indian Index tracker retured 37%. Bond funds, which are designed to be safe, have low returns, but some companies you can sell your fund, and go to cash at 5% or so, or a non-volatile stock. "Retirement" funds tend to earn very little indeed, or even negative.
Pick your manager- they vary:

..

So what I'm saying is, get your ISA payment in, for the about-to-end year 2023-2024. You don't have much time so anything will do for now, you can transfer it later.
WHERE you put it, depends what you want to do later. You will find that some institutions, eg Santander, have Cash Isa, or their Investment hub, which is a PITA to use and has a meagre selection of funds.
HSBC you can have shares, or funds, but they're separate.
Places like Interactive Investor, AJ Bell, Invest Engine, different mixes.
Newer on the block places like Trading212, eToro, you can hve anything all on the one platform, free, but they do NOT have much in the way of Managed Funds like Jupiter India.
I have some money at Hargreaves Lansdown for historical reasons. They get panned for high fees (0.45%+) which do mount up if you have a lot in there, but they're easy - pleasant even, to deal with. They have a lot of info on the site, and you can phone, or email and you get good replies.
You can invest in just about anything, but shares are less easy that T212 or eToro and they charge £11.95 per order. Not much for one lump at 20k, but no good if you want 10 stocks/funds. You can swap between FUNDS (like Jupiter India. Nomura Japan) free.

Have to say it - if you have the right sort of mind, which apparently few do, you can day-trade in a S&S Isa. , even leveraging the trade using some etfs, so you can make several percent, say, in a day. 5% per day compounded is huge over a year. Tax free. It does take effort, and time. Yes I have done it, thread in Hobbies (note that is mostlly not in an ISA ).


Pension
Specific , for those who aren't earning anything.
Put £2880 into a pension, up to age 75.
HMG ups it to £3660
You can take it out again after a year , making £720. You only pay tax on that if you're earning enough to pay tax. For now there IS headroom over the full Pension before the lower tax band starts.
So that's equivalend to 27% return or 6% or so on a pension.
You can do the same next year. You DO make a bit even if you're paying tax at 20%.
While it's inthe pension y can stick it in a FUND - see above. Jupiter India would have made the £3660 go from £5860 (taxable if you pay tax) or so. Not bad from 2880.
You don't have to invest it into anything, you can just leave it as cash, or put it in a money market fund which earns a few % pa. Or a DIvidend paying thing which will give you a few %, which won't be taxed much if at all if that's your only dividends. (You get some allowance then it's a lower rate).

If you have any questions like "what is a safe but earning fund now?", Google it, you'll get masses of info.
Any of the fund holders I've mentioned will have more or less noddy pages explaining. They also give opinions on what's looking OK oe a but riskier than it was.
At the moment they're expectin general growth but less than we've had, and come away a bit from being only on High tech/AI/chips.

If desperate, ask me, but whatdoIknow?
If you use any Funds whatsoever, you will have to watch it, and expect some ups and downs. and not be worried - you can always search to find out what state the market is in.

FUNDS - look for a Sharpe value, it's a measure of performance relative to something boring, times stability. Higher (0.4 or more, say) is better.

 

[blup]

I cant make head or tail of this, are you saying there are a few days left in the current tax year to invest in isa’s and the possibility of a 65 per cent return?

 

[Fred Blogs]

I cant make head or tail of this,

And that is precisely the problem with any financial advice. To us mere mortals most of it, in fact all of it, is gobble de gook. I've got roughly £250,000 some of which is in a, supposedly, safe investment earning me a tax free sum per month. The rest is just in my bank. I used to have a financial advisor that my bank supplied but they seem to have disappeared along with many many high street branches. I'm of an age where, to be honest I don't particularly care about earning vast sums from obscure sources, most of which are only designed to make money for those sources, but it would be nice if someone would make money simple.

 

[Murdochcat]

Wonder how many people actually have the ability to put £20k into an ISA other than those who get an inheritance?

 

[robinbanks]

@justinpassing perhaps you can edit your post to be a readable blog that goes into detail, with examples and explanations. At the moment it just reads like a list of stray/random thoughts from someone who is financially aware, but has been asked to generate a list of bullet points to expand on later. A brain dump where the amount of background knowledge required to turn it into something comprehensible is too great

 

[Ihavenojob]

My brother put most of his money in S&S ISAs, he's not concerned about the share price, just the dividends, he lives off them.

 

[Justin Passing]

No it's not a brain dump at all.
It's about ISAs and your ability to do bettter than the bldgs soc.. Other than the bit below the dotted line, it's all related and on one subject, not disparate things.
Isas are where you don't pay tax on whatever the money earns.
You can put 20k a year into them.
The year runs from April 5th.
You can't back-date your application, so if you miss it, tough.
Though there are 2 basic different sorts of isas, if you have money in one sort, you can transfer later to the/any different sort.

Given the date now, whatever type you can get into, this year, would be worth doing if you have the cash already, perhaps in a normal savings account earning a few percent, which is taxed.
Ordinary savings accounts, and cash Isas, both earn at a slower rate than inflation. It was that which got me into finding about what I could do which would be better.
It'll be quickest to open a savings ISA in a bank/bldg soc where you already have savings. You can transfer it elsewhere later, though that can be slow.

There are cash ISAs, and Stocks and Shares ISAs which are sometimes called Investment Isas.
The latter type can hold shares, or Funds, (the same sort of things pension funds are invested in). A Fund may hold a few or hundreds of different shares. Or Bonds, which are "loaned money" which traditionally earns more slowly than shares, but aren't affected (so much) by stock market ups and downs (and crashes). Best pure bond ones have returned say 9%,

Leaving individual Shares aside, for now, Funds can return very very much more than building society interest,.
It has been a good year, not all years are so good. A well diversified Fund, chosen by recommendatoin from Which or Forbes or the Telegraph or similar, would have returned you around 25 - 35%, if you'd just left it. If you'd had an eye on the stock market, you would have see n that tech stocks were doing a lot better than that. A Global Tech fund would have returned you maybe 45%. You can switch easily, and fee.

This iis such a huge imrovement over bldg soc's 5-6% that many think it's worth some risk. If you've been "in" for a year and are 30% above where you would have otherwise been, you can afford a 20% pullback. We haven't had one of those for a long time - 2008.

Care is needed, Independent Financial Advisers's are there to inform you about risk.

Apart from American Tech, completely different sectors have also done well, such as India and Japan. Even dead safe Bond funds beat the building societies. Nearer 10% than 5, say. There are lots of funds which have some shares and some bonds - like 80/20 or 50/50.

Your money isn't tied up like it would be in a 1-5 year fixed rate bldg soc account, though the price may well be varying so you don't KNOW what you'll get back at a particular time. It's common to split your pot - say part each in bonds, Japan, US, Europe, India or whatever.

We have bits of money dotted about (none inherited!) in pensions etc. Some was earning lmost nothing - ( a hangover from the days of the British bowler hat brigade earning money from you and telling you that you wouldn't understand) so I moved them. Since 1st Feb (2 months) they've earned about 8-10%.
You have to ask yourself what would happen if.... Say that part of your savings dropped in value by say 20% -30% overnight. Unlikely but possible. If you're about to retire and need every penny, you wouldn't dump all your life savings in one place and forget about it and hope.
But even if you "only" got 8% free of tax, it's a lot better than 5% taxed.

The more active you want to be, the more the possibilities grow. "Active" mainly means watching - but it's all on an app on your phone now.

If you want, you can pick shares for some of it. Not as hard as you might think. Rolls Royce has been doing well for over a year so no clairvoyance required:

193% is nearly x3.

If you buy and sell rapidly, say within weeks, days hours or minutes, it gets called trading not investing, but it's much the same. The risks and potential wins rise, a lot.

To see a range of these Funds - they're generally Exchange Traded Funds, ETFs, look for a SCREENER.
Here's one where I input "tech"

ETF Screener | justETF

Find, compare and analyze exchange traded funds (ETFs). Simple and fast.

www.justetf.com

Does that help??

 

[Justin Passing]

My brother put most of his money in S&S ISAs, he's not concerned about the share price, just the dividends, he lives off them.

The issue there is the value of the capital.
The example, is British American Tobacco. They pay 9% in dividends but the share price is down 15% this last year, and by 60% over the last few years.
Obviously the core business is in decline, so the 9% is getting less.

Some are OK, such as Aviva which pays 6% or so and grew 20% in a year. OK, but if you had the money returning 40%....

There used to be tax advantages to getting your return as dividends - but not if it's an ISA.

 

[Justin Passing]

I cant make head or tail of this, are you saying there are a few days left in the current tax year to invest in isa’s and the possibility of a 65 per cent return?

Yes that was it. 65% was for the whole year of course, not the couple of days.

I doubt you can get any money in an Isa for the year to April 5th 2023-24 now, but you might if you're quick..
That only matters if you have multiples of 20k...
You can put 20k in one for 2024-5 etc.

The money ("investment") doesn't HAVE to be in an ISA, but then you pay tax on the gains. Frankly I don't mind paying tax on some interest, I still get the other bit.
The account you have the money in is then called something like a Global Investment Centre(HSBC) or an Investment Hub (NatWest), or some such. It's an account where you can decide what the money is invested in. So to spell it out there are 4 types of account:

1) Cash-not-an-ISA____Cash, not in an "ISA" wrapper. Like normal Bldg soc a/c Maybe 5-6%
2) Cash-in-an-ISA _____Common in bldg socs, usualy a bit less interest than a non-Isa account. Called a Cash ISA. Maybe 4 -5%

3) "Investment", not in an Isa___ You put your money where you like (Funds, shares etc) , but pay tax on the growth and or dividends
4) "Investment", in an Isa _______ Same, but you don't pay interest on anything it earns, even if it multiplies in value.

With 3) and 4) you can sell the funds or shares you've invested in, and leave the money there "uninvested". With some places you then get say 5% interest. Your money isn't locked in, it would take a few days maybe, to get out as cash. If another Covid came along, you would have control via a phone app if you wantedthe funds transferred to cash and still be under the ISA wrapper.

@Fred Blogs do you know what interest rate you're getting? Hopefully they've got you sorted so you get several percent rather than a "safe" 2% or someting daft. It must be an Isa to be tax free. Many Bank ISA rates are poor, though.
250k is enough that it would be sensible to put 20k -50k or maybe more, into something which should get you 20% or so. If you avoid the most volatile high-tech investments, 20% would have been modest in the last year. Less in the year previous, but then the interest rates were very low.

In an "investment" account (type 3) you can use very very safe things like bonds, money market accounts etc, in a mix, which would get you nearer 10% than 5%. (taxable). Some financial advice would be wise for that to assess your aversion to risk, , but if you only need suggestions about which funds, it should be free.

Bottom line, it should be possible to get an extra 5-10k a year or so gain from what you've said, without dramas.
Isas are more important, now that some of the tax details have changed.

--

For cash savings, there are "Savings platforms" where you can put a lump, and still be able to manage the money between best accounts to suit you, and keep below the 85k (gov guaranteed safe) limit in each one if you want. (Hargreaves Lansdown have one, and also every other account type you might need. Very helpful but charge fees for some things.)

HL call theirs an "Active Savings" account.

 

[blup]

And that is precisely the problem with any financial advice. To us mere mortals most of it, in fact all of it, is gobble de gook. I've got roughly £250,000 some of which is in a, supposedly, safe investment earning me a tax free sum per month. The rest is just in my bank. I used to have a financial advisor that my bank supplied but they seem to have disappeared along with many many high street branches. I'm of an age where, to be honest I don't particularly care about earning vast sums from obscure sources, most of which are only designed to make money for those sources, but it would be nice if someone would make money simple.

A lot of it is about competing for market share, like the utilities the competition is illusory in the long term b3cause you default to standard interest rates/prices after the relevant rate expires. Its fine if you're obsessed with checking everything all the time but its not what it seems.

 

[Arbu]

Specific , for those who aren't earning anything.
Put £2880 into a pension, up to age 75.
HMG ups it to £3660
You can take it out again after a year , making £720. You only pay tax on that if you're earning enough to pay tax. For now there IS headroom over the full Pension before the lower tax band starts.

Thanks for posting this, Justin, I wasn't aware of it. I suppose the year is a full 365 days, i.e. you can't just pay it in on 4th April and withdraw it on 7th April in the next tax year? Also, I thought that if you withdrew from your pension funds you would then never again be able to make tax free contributions to it?

 

[berty3000]

Wonder how many people actually have the ability to put £20k into an ISA other than those who get an inheritance?

Lots of people if they are not profligate in their spending.

I've always been a saver and agree with the OP (although his first post is somewhat convoluted) that people should take maximum advantage of the ISA allowance. Means you don't pay tax again on money that has already been taxed. Not exactly a great privilege although I see it is coming under pressure now that the government needs even more money to waste on shyte and the usual useful idiots are defending the idea because their TVs and newspapers are instructing them as such.

People who don't waste money on stupid crap like bling cars, takeaways, taxis, over priced clothes, and all the other w**k people buy can probably afford to fill at least part of an ISA with savings each year.

 

[noseall]

Wonder how many people actually have the ability to put £20k into an ISA other than those who get an inheritance?

No many these days. 10 years ago for me maybe, if we had a really good year. I'm more breaking even now and I'm your typical saver and one that pays for everything in full (zero debt).

 

[Mottie]

I'm your typical saver and one that pays for everything in full

And then some because you are a self-confessed lazy B who CBA to shop around.

 

[noseall]

And then some because you are a self-confessed lazy B who CBA to shop around.

Swings and roundabouts Motts. As I have stated earlier, why spend £100 to save £90.

Define lazy?