Childrens' savings/investments/pensions

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  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    edited 24 February 2018 at 10:54PM
    Alexland wrote: »
    Yes but the trusts themselves have a management fee. Unlike an OEIC an IT or ETF cannot issue fee free units.

    Thanks, I was somewhat surprised to read that in the literature. I had considered the possibility of some sort of workaround that meant that they didn't charge the management fee in the Children's Savings Plan. Having read a lot more of the brochure, however, I have found the management fees for each of the trusts. Honestly, I think burying this information on p.20 is shoddy. Yes, everyone should read the brochure fully, but there is no good reason why in their headlines they couldn't include a statement that trusts had management charges ranging from 0.44% to 1.07%. That lack of transparency up front is what puts some people off investing: they think that there is going to be a catch somewhere. Baillie Gifford are doing nothing here to disabuse anyone of that view.
  • Alexland
    Alexland Posts: 9,653
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    edited 24 February 2018 at 10:43PM
    ValiantSon wrote: »
    Thanks, I was somewhat surprised to read that in the literature. I had considered the possibility of some sort of workaround that meant that they didn't charge the management fee in the Children's Savings Plan. Having read a lot more of the brochure, however, I have found the management fees for each of the trusts. Honestly, I think burying this information on p.20 is shoddy. Yes, everyone should read the brochure fully, but there is no good reason why in their headlines they couldn't include a statement that trusts had management charges ranging from 0.44% to 1.07%. That lack of transparency up front is what puts some people off investing: they think that there is going to be a catch somewhere. Baillie Gifford are do nothing here to disabuse anyone of that view.

    I agree that although the trust management charges are reasonable they are not clear in the literature that would cause the average retail customer to signup to the plan. The only reason I knew there would be management fees was by applying logic. It's nice to know they owned up to people willing to read the document for 20 pages! Also for a long term child accumulation investment a trust structure is not ideal as you would be paying stamp duty all the way reinvesting the dividends. Still the trusts do perform well.

    If you want a similar example look at The Share Centre LISA page where they are pushing the "No monthly admin fees" until you dig a bit deeper on another page to see the lowest OCF is 1.69%
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    Alexland wrote: »
    I agree that although the trust management charges are reasonable they are not clear in the literature that would cause the average retail customer to signup to the plan. The only reason I knew there would be management fees was by applying logic. It's nice to know they owned up to people willing to read the document for 20 pages! Also for a long term child accumulation investment a trust structure is not ideal as you would be paying stamp duty all the way reinvesting the dividends. Still the trusts do perform well.

    If you want a similar example look at The Share Centre LISA page where they are pushing the "No monthly admin fees" until you dig a bit deeper on another page to see the lowest OCF is 1.69%

    Brassneck, is a phrase that comes to mind! I had actually seen The Share Centre LISA fees before and thought they were disgracefully presented. That kind of behaviour doesn't encourage me to use a company for investments, but how many people miss it because the headlines obscure what is going on?

    As I said, I couldn't work out how there could be no management fees, but when I read the costs section of the brochure I assumed (wrongly) that there was some very clever workaround that I was unaware of. I should have trusted my instincts and read on until I found where they were hiding the truth.
  • Alexland
    Alexland Posts: 9,653
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    edited 24 February 2018 at 11:09PM
    ValiantSon wrote: »
    Brassneck, is a phrase that comes to mind! I had actually seen The Share Centre LISA fees before and thought they were disgracefully presented. That kind of behaviour doesn't encourage me to use a company for investments, but how many people miss it because the headlines obscure what is going on?

    I know a graduate at work who is being sponsored through her legal exams who believed her LISA was free.

    Alex.
  • anandp
    anandp Posts: 279
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    xylophone wrote: »
    You decided against BG back in 2013?

    http://forums.moneysavingexpert.com/showthread.php?p=62129835#post62129835

    You mention your children's CTFs - they have now been transferred into JISAs?

    How old are the children now?

    Nope I went for BG back then. This is for a second child but as the landscape is different now, I didn't want to just opt for the same as I went for last time.
    Interested in property investment, web tech, social media, forex, equities. Also a proud father & entrepreneur of sorts.
  • anandp
    anandp Posts: 279
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    ValiantSon wrote: »
    The Baillie Gifford Children's Savings Plan benefits from no tax privileges. While it is unlikely that the sums invested would incur tax in the short term, capital gains may be an issue at a later point. By contrast, a JISA would give you full tax advantages, which continue throughout the child's life, as the JISA becomes an ISA at 18. The result, therefore is that the money remains tax free for life. A JISA will, however, have on going costs (platform and OCF), whereas the Baillie Gifford option does not, but they do charge £22 for each withdrawal, which could be a big disincentive, depending on how you used the plan.

    The choice of investments is extremly limited with Baillie Gifford. By contrast a JISA gives you access to a wide range of investment options depending on the provider chosen.

    Personally, I think the Baillie Gifford option is a poor choice compared to the flexibility and tax advantages of the JISA.

    The limited nature of options is what puts me off this time more than the tax. I also don't want to be put in the position of paying 'active management' fees when passive investments into index funds can be done.

    Can JISA's be put into bare trusts? Is there any point doing this?
    Interested in property investment, web tech, social media, forex, equities. Also a proud father & entrepreneur of sorts.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    anandp wrote: »
    The limited nature of options is what puts me off this time more than the tax. I also don't want to be put in the position of paying 'active management' fees when passive investments into index funds can be done.

    Can JISA's be put into bare trusts? Is there any point doing this?

    Why would you want to put the JISA in to a bare trust? The money belongs to the beneficial owner and they have access to it at 18. If you set up a bare trust (and I am not convinced that you could put a JISA into one) then they would still have access at 18.

    With regards to Baillie Gifford, I think the fund choices are very limited and the costs not worth it, but that is a personal view. I also see no benefit in not protecting your child's assets from tax.
  • anandp
    anandp Posts: 279
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    Fair point - but can access to proceeds from bare trusts not be elected to be until an older age?
    Interested in property investment, web tech, social media, forex, equities. Also a proud father & entrepreneur of sorts.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
    anandp wrote: »
    Fair point - but can access to proceeds from bare trusts not be elected to be until an older age?

    In a word: no.

    The beneficial owner has an absolute right to the capital and interest at 18. This has been well-established in case law. Despite many people writing age restrictions into their wills for children inheriting under a bare trust, they are completely unenforceable and depend upon the person inheriting not knowing what their legal rights are.
  • xylophone
    xylophone Posts: 44,140
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    The child has an absolute right to access to and control of the assets in a bare trust at the age of 18 (16 in Scotland).

    https://www.gov.uk/trusts-taxes/types-of-trust

    A JISA cannot be put into bare trust. In effect the JISA acts like a trust.

    https://www.gov.uk/junior-individual-savings-accounts

    The cash/assets in a JISA always belong legally and beneficially to the child.

    The registered contact (parent or person with parental responsibility) is an administrator, controlling the account while the child is under the age of 16.

    The child has the right to withdraw money/ realise assets etc once he becomes 18.
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