The Lemon Fool

I've recently decided to go direct to Fundsmith for their FEF T Class Acc with an OCF of 1.05%.

I hold Fundsmith in my ISA, SIPP and Fund & Share Accounts at HL where the FEF I Class Acc OCF is 0.97% but the platform charge is an additional 0.45% to 0.25%. Although they don't offer a SIPP, it seems to make sense to buy their ISA and investment accounts direct rather than on a platform.

Wish I'd thought of doing this sooner - just wondered whether any others have done the same or take a different view on the potential saving?

WCW

Sounds a sensible move and was the default a few years ago.

I presume the T class is a slightly more expensive one for owning direct? I own I class at 0.97% ongoing charge through iWeb. So it's cost me £5 x 2 purchases so far in platform fees. It's about £11k so that 0.08% difference in fund charges would be about £8.80 a year. So not much in it in year 1 and probably insignificant cost benefits for me the longer it goes on. Unless that is I buy more than once a year going forward. For much bigger sums of money the iWeb class I rout gets cheaper the higher it goes.

FredBloggs wrote:You may wish to reflect that on a flat fee platform, adding Fundsmith to your portfolio wouldn't cost you any extra, unlike the % based platforms like HL. If you held on a flat fee platform, you're likely to be able to hold the less costly "I" class units. I hold this at II in my ISA and SIPP.

Quite right. My wife holds a few open ended funds, but if her platform was to charge ad valorem for the pleasure, she would see this as daylight robbery and would either get rid of the open ended funds, or move platform. She chose the latter approach last year for that very reason. She does have a good slice in the Fundsmith 'I acc' class, no platform charge.

Having said all that, she worries on how long these flat fee 'beauties' will be with us.


Ozyu

Thanks all for your comments and ideas.

One of the things I like about Fundsmith is their Regular Withdrawal facility that the mentioned at their last ASM. Being able to have them return a regular £ or % of your investment monthly or quarterly direct to your bank seems a good way to provide regular income in retirement.

WCW

FredBloggs wrote:

WorldCupWilly wrote:Thanks all for your comments and ideas.

One of the things I like about Fundsmith is their Regular Withdrawal facility that the mentioned at their last ASM. Being able to have them return a regular £ or % of your investment monthly or quarterly direct to your bank seems a good way to provide regular income in retirement.

WCW

Couldn't agree with you more. I am mildly surprised nobody else (as far as I know) offers this. Not least because it gets rid of thie "is it income or is it growth" nonsense. It is simply money. To spend.

It's growth

"As the regular withdrawal facility operates by repurchasing shares, this constitutes a disposal of shares for tax purposes. This is a capital gains tax event not an income tax event." https://www.fundsmith.co.uk/docs/defaul ... f?sfvrsn=2

It's growth

"As the regular withdrawal facility operates by repurchasing shares, this constitutes a disposal of shares for tax purposes. This is a capital gains tax event not an income tax event." https://www.fundsmith.co.uk/docs/defaul ... f?sfvrsn=2

So half as much tax as HYP "income" - what's not to like?

WCW

WorldCupWilly wrote:

It's growth

"As the regular withdrawal facility operates by repurchasing shares, this constitutes a disposal of shares for tax purposes. This is a capital gains tax event not an income tax event." https://www.fundsmith.co.uk/docs/defaul ... f?sfvrsn=2

So half as much tax as HYP "income" - what's not to like?

Not sure why you felt the need to bung "HYP" in there, so let's not divert into that potential rathole.

If you are saying that for your personal tax situation additional capital gains would be taxed at half the rate of addition dividend income then that's fine for you but one should be careful in generalising about such matters.

E.g. A person living totally off of their investments (and there are some on these boards) would pay less tax on dividends than capital gains up to the BRT limit of £46,350 (actually, a little more but I can't be bothered to do the maths. )

mc2fool wrote:
E.g. A person living totally off of their investments (and there are some on these boards) would pay less tax on dividends than capital gains up to the BRT limit of £46,350 (actually, a little more but I can't be bothered to do the maths.

If you keep the net gain on investment disposals below the Annual Exempt Limit, there's no CGT to pay. If on the other hand you got a dividend yield of 5%, assets of as little value as £ 40,000 would potentially be hit by the 7.5% dividend tax.

Alaric wrote:

mc2fool wrote:E.g. A person living totally off of their investments (and there are some on these boards) would pay less tax on dividends than capital gains up to the BRT limit of £46,350 (actually, a little more but I can't be bothered to do the maths.

If you keep the net gain on investment disposals below the Annual Exempt Limit, there's no CGT to pay. If on the other hand you got a dividend yield of 5%, assets of as little value as £ 40,000 would potentially be hit by the 7.5% dividend tax.

No, 'cos the personal allowance applies to dividends, so in the situation above and with a 5% yield you'd need dividends from £277,000 of shares before paying any dividend tax.

But my point is not so much to argue specific cases but to say that one should be careful in generalising about tax matters as each person's situation is individual.