1 February 2010

Low ISA charges have long-term benefits for SIT ISA investors

SIT Savings Ltd is offering ISA investors the opportunity to invest in The Scottish Investment Trust PLC (SIT) through a stocks and shares ISA with one of the most competitive charging structures in the investment trust ISA market. 

SIT Savings Ltd, SIT's wholly-owned subsidiary, is one of the few ISA providers offering an ISA with a capped annual pricing structure.

The annual charge is 0.6% (including VAT) of the value of the ISA investment and is capped currently at £30 plus VAT, no matter how much the investment grows or how many years' ISA allowances have been invested in SIT. 

The 0.6% charge benefits small investors while the capped charge favours larger investors.  For example, an investor with an ISA valued at £1,000 would only pay £6, while an investor with an ISA valued at £7,200 would pay the capped charge of £30 + VAT (without the cap the percentage charge of 0.6% of the value of the investment would come to £43.20).  

The detrimental effects of high charges are even more noticeable in times of difficult market conditions.  Investors with large ISA investments can make sizeable savings in charges by choosing their ISA provider carefully, paying particular attention as to whether the charges are percentage based or a fixed rate or capped charge.

For example, if investors had been able to invest their entire ISA allowance for each tax year since the launch of ISAs in 1999, they would have invested - ignoring any gains or losses due to market movements - a total of £77,400 over this period.  The annual SIT ISA charge on a portfolio with a value of £77,400 would be only £30 + VAT compared to the £387 which would be paid by an investor in an ISA with a seemingly small, but uncapped, percentage annual management charge of 0.5%.

Sherry-Ann Sweeting, Marketing Manager, SIT Savings Ltd, says, "Our research has shown that, along with fund performance, charges rank at the top of investors' criteria when choosing an investment product.  We all know that past performance is not a guide to the future and market movements are something investors have no control over.  However, charges can be as material to returns from an investment as the performance of the fund and they are something the investor does have control over - in their selection of product / provider. Therefore, it is very important for investors to consider charges when selecting their investments.

"SIT's stocks and shares ISA combines access to a global portfolio of international equities with a highly-competitive ISA charging structure."

Past performance may not be repeated and is no indicator of future performance.  The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations and investors may not get back the amount originally invested.  SIT has a long term policy of borrowing money to invest in equities in the expectation that this will improve returns for SIT shareholders.  However, if markets fall, these borrowings will magnify any losses.  Freedom from tax in an ISA applies directly to the investor.  The tax treatment of your investment depends on your individual financial circumstances.  Tax legislation may change.