Portfolio sized ISA Pricing

#1

Hi, I’m not sure if this has been raised before, but would it be possible to have the ISA fee priced according to portfolio value and capped at £3?
I’ll try to be to the point. Here’s my reasoning:

As a fledgling investor, my portfolio is very small. Lets say I invest £83.33 per month, ~£1000 per year. Assuming I made a 10% profit (£100) I would lose 1/3 of my profit to ISA fees, massively slowing my portfolio growth.

The logical conclusion for me here would be to not start an ISA with freetrade and use your GIA until my portfolio had grown, as I think the first £11000 of capital gains and £2000 of dividends are not taxed on a GIA (correct me if I’m wrong).

If I’m correct, then even after I had exceeded my limit I would still be better off with a GIA for while, lining the tax man’s pocket instead of freetrade.

I would rather support my broker. An ISA is much more “sticky” then a GIA, and there is a definite bonus in having my portfolio in an ISA earlier and not having to sell/ buyback my equities later.

My idea is making the
Monthly ISA fee = (portfolio size * 0.001) / 12

Or increasing the bold section to 0.01, but capping the max monthly fee at £3.

This way, you would get people like me on ISA’s earlier, locking in potential long time investers. The fees would gradually increase my portfolio does. Freetrade also potentially gets paid earlier. I still would technically be better off going GIA first, but the value of not having to sell/buyback makes up for this.

This is not a deal breaker for me as I will GIA first if necessary, but it be a “nice to have”. Thanks for reading

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(#18414) #2

I think you said it all.
In the end of the day it’s not really a problem. Of course there’s the chance one having to pay more when buying back in the ISA, but it’s also possible to end up paying less.
I guess the real hassle is to go through the whole process, specially if the investor have a portfolio with dozens of individual stocks. But given the size of the allowances, the transfer wouldn’t have to be done in one go.

I don’t really see this as being a problem. I can see the convenience you seek though. And if FT were to decide going for it I would support it. It would include complexity in the pricing structure though.

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#3

Yeah, the pricing structure is very clean, straight forward and non-scummy right now.

And I’m sure some early investors don’t mind taking such a large percentage hit early on if they are thinking very long term. So there would likely need to be an assessment there on what would provide freetrade with the best return.

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#4

I know exactly where you’re coming from, but I’m with Raul in thinking the increase in pricing complexity isn’t worth it. Being known as an easy-to-understand fixed fee platform has very high value in my opinion.

Instead I’d like to see in-app guided walkthrough to help people pick the appropriate account type for them. “How much do you expect to have invested after a year?”. If, say, 30% of the answer was less than the current personal CGT allowance, the app would suggest opening a GIA. Otherwise it would suggest an ISA.

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#5

If your only putting in £1000/year I doubt it’s worth opening up an ISA. With a free GIA you don’t pay tax until your capital gains exceed £5k/year and/or dividends exceed £2k/year.

I have over £10k invested and I’m starting to think an ISA was the wrong idea.

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#6

The allowance is currently £11,700.

Yes, as Antidev points out, a sizable proportion of any gains you might make would go on the ISA fees.

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#7

£10,000 pot and a £30 a year isa fee is 0.30% of your portfolio. However the fee percentage will continue to drop as your portfolio grows.
I will open an ISA with 5k in April. Personally I don’t want the hassle of even thinking about capital gains or dividend tax in the future. Everyone’s circumstances are different :v::desert_island:

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#8

I don’t think that’s quite the way to think about it.

If you invested £10,000 at the start of the year and then sold it at the end of the year for £10,500, you’d have made a 5% profit. Yay!

But your expenses were £36 due to ISA fees. So actually you walk away with £10,464, which is a profit of only 4.64%.

Your profits were reduced by 7.2% just because of your account type.

(But yes, I fully understand that £36 may be small enough to be an acceptable cost to aid convenience when thinking about taxes… though if you don’t sell anything, the self-assessment is no more difficult than normal. And even if you do, HMRC have an easy to use walk through to work out what you need to report, if anything)

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#9

You won’t need to think about tax for a long time even with a GIA. You would need a very substantial amount invested to be making £10k+ annual capital gains and £2k+ dividends.

If I had a GIA and built it up to around £75k and the dividend started to exceed that £2k range then it might be worth switching to an ISA. Right now, I don’t need it.

I was hoping to invest enough during the next round of crowdfunding to benefit from the free ISA for life. However, during R3 the minimum investment for that was £5k. I won’t be investing that sort of money so may request to switch back to GIA if possible.

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#10

Does Freetrade make a loss on GIA ? I’m sure I read it does.

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(Dave Smith) #11

If you’re getting 5% in dividends (and there are a number of companies in the FTSE100 who pay over 5%) you only need £40K to hit the 2K dividend limit

I know that’s a lot for most people, but it’s not an unimaginable amount

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(Dave Smith) #12

I guess if you only do basic trades in UK stocks in a GIA and so pay no fees at all they must make some loss?

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#13

They ought to be earning a little interest on cash left in accounts. Of course, once fractional shares and DRIP is implemented, there’ll be a lot less cash laying about…

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#14

I’m nowhere near £40k and it’ll be years before I am. If someone has £40k and is pulling over a 5% dividend yield (which is high) then more power to you. I would be better if with a GIA for the next few years.

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#15

Don’t forget that any transfer/switch from non-ISA to ISA would be limited to the max limit per year, currently £20k.

Future governments might increase or reduce this, although I have a feeling that it will be the latter.

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#16

That’s a concern if the masses decided on GIA’s and basic trades.

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(Emma (#20 😎)) #17

What if you need to sell your shares to cover something completely unexpected or you decide to move house and sell shares? You’d be clobbered for Capital Gains

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#18

The £20k ISA Freetrade offer isn’t flexible which for me is another drawback to this type of account. If I lift some money out I can’t put it back in. I’ve just lifted £3500 out of my ISA and although I would like to put that back in a few months from now I can’t. I can only put a maximum of 20k in annually. So the maximum I can put in my ISA this year is £16,500. If I had a GIA I could still put as much as £20k in. Opening up a ISA later on and just putting in one lump sum of £20k each year doesn’t sound like an issue to me. It would take just a few years to have £40k-£60k in there (if I ever reach those amounts) and make that account and it’s fees worthwhile.

For me, I’d rather have a GIA until such times as I would benefit from an ISA. Some would rather pay for an ISA without benefiting from it for several years. It’s down to individuals to determine what is best for them.

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(Dave Smith) #19

I reckon ISA’s will be popular. 0.3% ish on ~10K compares favourably with the 0.45% Hargreaves Lansdowne charge for instance, and combined with Free trades will make it cheaper for lower amounts as well

Even if you don’t have £10K+ now, you might have next year, think positive :smiley:

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#20

1 less coffee shop Caramel Macchiato per month will pay for a month and a half of ISA fees :tada::boom::freetrade::coffee:

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