Future Passive Income – ISA Account

Hi there,

I wanted to start this second round of posts by providing some insights on a few financial products that will help you to secure your future. I am 39 years old, and although retirement sounds quite far away for me, if there is one thing that we can’t stop it’s the clock ticking… which means that sooner or later we will all reach our retirement time.

As you know, I’ve got two children, and the last thing I want for them is to have to take care of me or my wife financially when I’m too old to produce active income (i.e. working!). I feel one of my duties as a parent is to ensure I won’t be a financial liability to them. As Rome wasn’t built in a day, back in 2014, I started to save money in some saving accounts available to everybody in the UK. Before we dive into more details about how I’ve been managing these accounts, let me present your two best options for working on your retirement savings

As I intend to share a lot of detailed information about both of these, I will split this article into two separate posts. Today I will start with Stocks and Shares ISA (Individual Saving Account).

Stocks and Shares ISA (Individual Saving Account)

Is a tax-free investment account that allows you to invest your savings up to £20,000 per year. Note that this amount has been the limit for a number of years, but it could change and it could either be higher or lower in the future. The investments can include individual shares, investments funds, bonds and many other options, depending on the platform, or financial institution that you use.

From my point of view, using a stocks and shares ISA is an amazing tool to help you invest in your future, because it provides a very generous tax advantage that you won’t find in a general investment account in the UK. Any money held inside this account is protected from tax on dividends or capital gains tax. Just a quick reminder, all investments involve risks, and you might get back less money than you put in.

Any UK tax resident over 18 years old can hold a Stocks and Shares ISA account. There are lots of options to choose from when deciding where to hold the ISA account, and plenty of different platforms to suit different types of investors. My advice would always be to ensure that your provider is covered by the Financial Services Compensation Scheme (FSCS). If your ISA provider is regulated by the Financial Conduct Authority (FCA), in the event that your provider collapses, your money and assets are protected up to £85,000 per eligible person and company. Every reputable bank (i.e. Barclays, Lloyds Bank), insurance company with financial services (i.e. Aviva), or any digital wealth management service provider (i.e. HL) will be regulated by the FCA. For more information, please visit the FCA website: https://www.fca.org.uk/

How to choose the best ISA account?

I found it very important to find a provider that I could trust with my money! Finding the correct provider is a crucial step on your financial journey.. Luckily we have lots of options in the UK, which is why it’s important to think about several elements before choosing the correct ISA account for you:

  • Ensure the provider is regulated by the FCA, as mentioned above.
  • Fees: Low fees should not be your main driving point when choosing a provider for investment, but they can certainly help! Ideally, they should have both low share dealing costs and overall platform fees. For your reference, you can find four different fees:
    • Trading fees: Every single time you buy or sell an asset in your Stocks and Shares ISA account, you will have to pay a trading fee or commission charge. Let’s not forget that at the end of the day, the supplier acts as an intermediary between your order and the market.
    • Platform fees: I believe that the majority of the Stocks and Shares ISA providers will charge an ongoing account fee. This could be a flat monthly rate, or maybe an annual fee that is charged as a percentage of your holdings. How much money you have in the account will determine which option works out cheaper for you.
    • Fund custody charges: Several brokers, in addition to the platform fee, might charge a fund manager fee as well, for holding investment funds in your account.
    • Foreign exchange conversion rate charge: If you often buy shares or you hold international investments, be ready to get charged a small percentage of the transaction as a foreign exchange conversion rate. This might become relevant if you buy lots of overseas investments.
  • Wide range options of investments: For me it’s crucial to have a large range of options available, in order to create a well diversified investment portfolio. But of course it could be the case that you plan to invest in simple funds, so you need to make sure you select the correct option for your strategy.
  • Useful accounts features: To have some resources on hand, like news, graphics or tools can be beneficial. However, you can also find many free resources online.
  • How user-friendly the App or browser is: If you are a beginner investor, it might be useful to find a platform with a very easy & friendly design, that can help you during your firsts investments. You could also benefit from providers who have learning resources available.

My plan for the ISA since I opened my first account, has been to add £150 each month. I’ve been following different strategies, but I must confess that the first year and a half I wasn’t following a clear path. As always in life, if you don’t have a plan in mind, and you keep changing roads, it becomes more difficult to reach your destination. That’s why at some point I had to freeze my investments, read more books, and enrol myself in several courses to increase my knowledge on this topic. After this period I came up with two investment strategies that work well for me:

  • Dividend Strategy
  • Index Fund Investment

I will have two separate posts to explain these two strategies in more detail, but I can give you some heads-up: since I started investing some time in them, my results changed from break even (which means no profit or losses), to a consistent profit! So if you are interested, start following www.therealpassiveincome.com , as you will get more information about these strategies in the near future!

DISCLAIMER: Before I leave you today, I want to reassure you that www.therealpassiveincome.com is only sharing my personal view of these topics, based on my previous experience and knowledge. Therefore, as a kind reminder, please read the following statement of the T&C of this website:

“Therealpassiveincome.com is NOT regulated or authorised by the Financial Conduct Authority (FCA). For more information, please refer to the FCA website (https://www.fca.org.uk/).

All investing in the securities markets, cryptocurrencies, or any other asset involves risk. Therealpassiveincome.com is NOT providing any financial investment or TAX advice services. You must know that any decision to make any investment, regardless which kind of product, in the financial markets, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extent you believe it necessary. Therefore, we are not responsible for any action you undertake which results in financial or any other kind of loss.”

2 thoughts on “Future Passive Income – ISA Account

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: