Buying gilts within an ISA

[chrish]

I was just wondering if anyone based in the UK based has any experience of buying gilts within an ISA? I'm looking into a number of ISA providers for implementing a PP, but can't see much info about this. If anyone has and could let me know their experience it would be much appreciated. (I understand that gilts must have at least 5 years to maturity to go in an ISA, this question is regarding the LTT portion of the PP)

[gizmo_rat]

All my Gilts are ISA'd with a couple of brokers, Alliance Trust and Interactive Investor. I also have a taxable account with XO which apart from the tax and subscription limit works the same way.

In principle I think all brokers can handle Gilts, they just don't tend publicise it as I suspect there is little appetite for them from most customers.

What I've found varies is the degree to which Gilts are integrated into the purchasing front end. So for example last year Alliance Trust and Interactive Investor just offered a price feed, so you could see how much your Gilts were worth but dealing had to be done over the phone (at online prices). XO is completely integrated. However II revamped their systems early this year and it looks like you can now trade directly online.

AT also charge a £30 annual fee (with one free trade, normally £12) and £10 to transfer money out. II and XO don't charge annual fees, dealing fees are £10 and £5.95 respectively.

So between the 3 brokers I use I couldn't choose between them, they are pretty much of a muchness. I probably wouldn't have used AT if I'd have looked in more detail at the ISA fee structure.

So in the absence of anyway of judging broker risk, it comes down to cost which is largely a function of how often you need to trade. (Gilts pay their interest twice a year as cash into your ISA account, so you probably need to make at least one trade a year) 



     

[chrish]

Thanks very much, that's exactly what I needed to know - I was thinking of opening an account with II anyway, and if they now support direct trading of gilts online then that seals the deal for me.

[gizmo_rat]

Yes I'm probably going to use II for this years ISA too. Thinking back to last year there were only two minor issues I had with II.

Firstly getting money into the ISA. If you are paying in a lump sum via a DD card you have to phone your bank to get the transaction limit raised temporarily. Most of them have a default 10K limit, which makes the transaction fail without giving you a reason.

Secondly if you purchase a mutual fund (e.g. Index tracker) don't forget they will be charging a hidden commission. 

[chrish]

Secondly if you purchase a mutual fund (e.g. Index tracker) don't forget they will be charging a hidden commission. 

What charges are there other than what's included in the TER? And is II different from other ISA providers in this respect?

[gizmo_rat]

I don't know.

A couple of months after I bought an FTSE index tracker from them I got an apology and a refund for inadvertent commission overcharging. I wasn't even aware that I was paying a commission on an index fund purchase.

However, I note that they say that funds are available at 0% initial fee and you'd hope all other costs are in the TER.

I've found fees pretty opaque across all the brokers I've used, they tend to crop up unexpectedly.

[costs] manifest themselves in more incarnations than the Hindu god Vishnu when it comes to investing.

http://monevator.com/2011/06/21/how-to- ... ers-costs/

[gizmo_rat]

On the subject of broker risk;

HMRC rules require shares within ISAs to be held within a nominee account. So personal Crest accounts are not an option for ISA investors.

If your broker becomes insolvent and commits fraud by not ring fencing nominee accounts, i.e. has sold client securities, then the FSCS will compensate you for up to £50,000 per FSA registered broker / fund platform.

Black swan avoidance says limit your account exposure to £50,000 total per broker / fund platform.