Managing a HYP+ Annually

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I thought I’d better wait until the 2016/17 tax tear has ended before I said any more.

Unfortunately, neither of my brokers (HSBC InvestDirect S&S ISA & AJBell S&S ISA) seem to provide a statement of dividends received during a tax year – so it appears you must trust the broker you are with to post all the dividends correctly and the share you are invested in to submit to the broker all the dividends and corporate action amounts you are entitled to.

My objective is to produce an easy to follow and maintain annual check on all our income sources - but it seems in this regard I have no alternative but to trust them as the alternative is to trawl through hundreds of records and deal with what is confusing language to an outsider.

Consequently, I have almost decided I should withdraw each year all the un-invested cash in our S&S ISA accounts and to check the amount withdrawn is greater than 4% of the total holdings. I realise it could be way more than 4% because a company may be sold or get into some corporate action or other but so long as it is at least 4% of our holdings, then it seems to the best I can come up with. If it is less than 4% then my instructions are to sell the HYP and transfer it to a cash ISA. I believe this %age can be easily set up in the simple spreadsheet I envisage.

[Itsallaguess]

I thought I’d better wait until the 2016/17 tax tear has ended before I said any more.

Unfortunately, neither of my brokers (HSBC InvestDirect S&S ISA & AJBell S&S ISA) seem to provide a statement of dividends received during a tax year – so it appears you must trust the broker you are with to post all the dividends correctly and the share you are invested in to submit to the broker all the dividends and corporate action amounts you are entitled to.

My objective is to produce an easy to follow and maintain annual check on all our income sources - but it seems in this regard I have no alternative but to trust them as the alternative is to trawl through hundreds of records and deal with what is confusing language to an outsider.

Consequently, I have almost decided I should withdraw each year all the un-invested cash in our S&S ISA accounts and to check the amount withdrawn is greater than 4% of the total holdings. I realise it could be way more than 4% because a company may be sold or get into some corporate action or other but so long as it is at least 4% of our holdings, then it seems to the best I can come up with. If it is less than 4% then my instructions are to sell the HYP and transfer it to a cash ISA. I believe this %age can be easily set up in the simple spreadsheet I envisage.

Withdrawing cash from an ISA wrapper seems like the absolute worst way to try to find a solution to this issue.

I have an AJ.Bell shares-ISA, and if I go to My Account / Cash Statement, I can set up two dates to signify the period I want to look at, or I can actually select 'Last Tax Year' in the drop down menu, which I've just done and it brings back a cash-statement for the last tax-year period.

I can then select 'Download', and I can open the resulting CSV file in Excel, from which I can filter off all non-Dividend cash elements of the period in question, and use the resulting data to check off any expected dividends, and also corroborate amounts etc.

Does that help with at least one of your accounts?

I'd be very surprised indeed if the HSBC offering doesn't provide a similar process, and although it amounts to *some* work on your part, it might be a much better solution to the one you seem to want to use, which is throwing the baby out with the bathwater, in my opinion.

As an aside, whilst I do track dividends-paid in my account, this is mainly for overall-yield tracking purposes, and not to check they've been paid, and I cannot remember the last time I had to contact any of my brokers to chase up a forgotten dividend payments. Some may be a day or two later than expected, but I would hope we can allow for those types of issues from time to time.

Cheers,

Itsallaguess

[Julian]

I manage my HYP annually and do it by balancing a simple equation...

EB = SB + D - W

where...

EB = year-end balance
SB = balance at start of year
D = dividend income for the year
W = withdrawals during the year

If it is a contained system, i.e. all dividends paid to the same account and all withdrawals from that account as I assume would be the case for an ISA then the balances can be read on a fixed day each year and if withdrawals, I assume either as income drawn or as new purchases of shares are accurately recorded, then the dividend income is easily calculated. In the case of an ISA "D" might be augmented by an ISA subscription as an extra input but that is pretty trivial to adjust for. (Sadly in today's environment the possibility of interest earned on cash balances being an additional factor contributing to "D" is unlikely!)

I actually use this technique for multiple things in my finances. I use it for my ISA and SIPP (both basically HYP although with some income ITs added in) and also for my non-tax-sheltered HYP plus I also have a separate current account for my household bills where I have the outgoings (W in the equation above) as the variable to be calculated where I keep the cash input ("D") constant because it comprises 12 equal standing orders into the account and by measuring the difference in year-start and year-end balance I can easily see whether my standing orders are over-funding or under-funding my basic household bills and calculate what those total bills are without needing to add up all my phone, TV, gas, electricity, water, council tax etc bills individually. I do the same thing with a self-contained tax actual account as well to meet my higher rate tax liabilities each year and again easily tell from whether the year-end balance is more or less than the start-of-year balance whether my monthly tax accrual standing order is sufficient to cover my tax liabilities.

- Julian

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Thanks itsallaguess
I agree with your sentiments about the ISA but I should have said that now all my investments that would otherwise attract tax are in ISAs and we retired a while back, I can extract the un-invested cash that has built up without a worry – besides, very few of us will be able to afford an ISA indefinitely and will probably need to tap into the funds at some point. Unfortunately, I no longer have a need for the ISA subscription – sod’s law seeing as how it is quite a lot now!

I should also have said something is wrong with me so I’m forced to find a simple method of managing our accounts. My wife has no interest in learning and I couldn’t teach her about HYP anyway!

I thought of selling the HYP but have left them invested and adopted the ‘eternity HYP’ espoused by Pyad. If there is any cash left over at the end of the year then Premium Bonds can be bought. As you know, winnings from these isn’t taxed. I realise my HYP will become ‘unbalanced’ (something I previously held dear) but needs must.

I’ve hardcoded the 4% figure and worry a bit that this is right – but it’s more than twice we can get on cash so I’m quite relaxed about it.

HSBC do have a similar capability but I haven’t seen a CSV output and besides, you have to total it etc. to arrive at an annual total… It’s something I could and would do but I’m not sure it’ll appeal to my wife and I want to keep it simple. I was surprised how difficult it is proving.

[bsdropout]

With ISA’s, the income from dividends and sales etc. is indeed kept in the account and it’s only that I might elect to withdraw it for the reasons explained to Itsallaguess... and the simplicity of the ‘4%’ function that I can see something like this working. I can tell that you’re quite keen on the ‘EB = SB + D – W’ notion and I can see that it works for you (and me – I do something similar) but when you try to add up pensions, cash savings, Premium Bonds, HYP, un-invested cash, current accounts etc etc it does get surprisingly messy – especially when you have to explain it to someone!
Thanks for sharing your thoughts Julian

[Itsallaguess]

HSBC do have a similar capability but I haven’t seen a CSV output and besides, you have to total it etc. to arrive at an annual total… It’s something I could and would do but I’m not sure it’ll appeal to my wife and I want to keep it simple. I was surprised how difficult it is proving.

Thanks for explaining your situation a little more bsdropout, and I now understand better that you're looking for a solution that might lose a little in accuracy if it gains something on the simplicity side of things, so I can see where you're coming from now.

With regards to the lack of CSV output on the HSBC side of things, if you want to pursue a spreadsheet-based solution for that account that's similar to the one more easily arrived at via the CSV route of the AJ.Bell offering, then I'd simply get the information in your browser and try a straight copy/paste by highlighting the form-type output in your browser and then pasting into your spreadsheet. With a bit of luck it'll drop into your spreadsheet in row/column format very similar to the CSV dump anyway, and might well be good enough for what you want to do.

As you say though, if you're extracting the cash anyway, then I can see your rough-and-ready solution being appetising if you're looking for something simple, without the need to get to 3 decimal places with regards to accuracy.

Cheers,

Itsallaguess

[DiamondEcho]

Unfortunately, neither of my brokers (HSBC InvestDirect S&S ISA & AJBell S&S ISA) seem to provide a statement of dividends received during a tax year – so it appears you must trust the broker you are with to post all the dividends correctly and the share you are invested in to submit to the broker all the dividends and corporate action amounts you are entitled to.

I'm surprised that you seem to be facing difficulty accessing the information that you need; it would be strange IMO/E if such core info wasn't readily available somehow. If the means to receive it aren't apparent, as a first step I'd ask the providers.
Even if you can't get a statement for a tax year are you not able to access and copy an annual statement each year end and apply the tax-year dates across those statements as appropriate?
I don't know what your experience has been with your brokers but I absolutely wouldn't trust mine to make no errors. They very occasionally make an over-payment but are swift to correct those themselves. Underpayments can happen too and there have been times they've gone uncorrected until later when I have alerted them to the issue.
Your experience with your brokers should also help guide you. How timely and accurate have their past payments been? If errors have occurred can you see any pattern in them? For example in my case I have learnt that I need to keep an eye on dividends that are declared in a foreign currency and converted to and paid in Sterling by the company at the FX rate on a certain day [often noon on the Record Date]. Sometimes my broker uses the incorrect FX rate, and this is by far the most common error that I encounter with them.

Your last point re: 'corporate action amounts', and again having to trust the broker. No, I cannot see how this can be. How about corporate action events? What happens if one of your shares has a rights issue, how would you know, how would you exercise your right to subscribe, or sell the rights?

[bsdropout]

Itsallaguess - I’d be happy to get close to an integer never mind a decimal place!

[bsdropout]

DiamondEcho - I can see the numbers from both brokers in a report but without using a third party product, they’re not easily totalled and tend to include all cash in/out not just dividends - so it requires some knowledge of the terms used. When I monitored my HYP monthly, it wasn’t a problem as I entered the date a dividend was due and the amount per share - and checked it was received. It’s moving from monthly to annual that I find there’s a significant loss of readily available information - especially if the target user isn't spreadsheet savvy!

My experience of brokers (and shares) is similar to yours. It seems you can’t easily do an annual check that they’ve been paid or posted to your account correctly - and that fact prompted me to put a check in. However, the best I've come up with is the crude check that the amount withdrawn is more than 4% of the value of all holdings. I know it’s very rudimentary but it's all I can come up with. By the way, if it is under 4% (for any reason) I’ll probably leave an instruction to sell the lot.

Regarding what you say about corporate actions - as I understand it, there’s always a ‘do nothing’ option – probably for the Doris’ of this world. So in the case of a rights issue, if you did nothing, the rights would automatically be sold and the amount credited to your account. That's the theory - I find it impossible to check it actually happened - unless you keep detailed records and I can't keep those. If there wasn’t a ‘do-nothing’ alternative that returned cash to your account I guess it would be a show stopper and I'd have to sell the HYP.