Investment bonds for daughter

CLAPTON

IanPt wrote: »

Hi,

My 10 year older daughter has recently inherited some money and my wife and I have been appointed trustees to manage the money until she's 18.

Its in the order of 30k so a significant amount and I've taken some initial advice from an IFA. My main request was that investments have mainly low risk bias with the objective being to ensure that overall return (including any charges) over the next 8 years at least matches inflation. Her advice was to to place it all in a number of funds wrapped in an investment bond wrapper (Legal & General Portfolio Bond). While on first sight the funds selected did seem to give an appropriate spread of risk the charges seemed rather high (approx 2% p.a.). Also on further reading there seems to be some advice that investment bonds are not particualarly suitable for non taxpayers.

Overall I was not that impressed by quality of her answers or the lack of examination of other options for investment - while I could go back to her or to another adviser it would be really useful if anyone with more experience in this sort of thing had any thoughts.

Thanks in advance.

the answer to your exact requirements has already been given

government indexed linked 3 and 5 years certs give tax free RPI indexation plus 1% real interest
no risk no hassle

IanPt

dunstonh wrote: »

You cant compare 4, 6 & 8% on bonds with say 4,6 & 8% on unit trusts, for example, as the tax differences will not give like for like. Those returns are not ambitious with relevent investments. However, the lower the risk you take, the lower the likely returns will be and the more important charges become. The reason 4, 6 & 8% are on the illustrations as examples is that they are considred the most likely long term average range.

Its not that I view the 4/6/8 as ambitions but if the proposal is such that I need to get over 6% to beat the lowest possible risk of investment does that mean I've got a 50% chance of not achieving the growth I need (since I need to be middle of the illustrations or better) and is that too ambitious for a 7 - 10 year period when my main aim is to ensure the money is still there when my daughter goes to university. I know you can't really answer that but hopefully it illustrates the problem.

(together with the fact that I can seem to get a more in depth discussion of my options with a few minutes on an internet forum!)

IanPt

CLAPTON wrote: »

the answer to your exact requirements has already been given

government indexed linked 3 and 5 years certs give tax free RPI indexation plus 1% real interest
no risk no hassle

Indeed it has and I was aware of it, unfortunately the fact that it wasn't included in the options outlined in the supposedly expert advice I received makes me doubt the overall quality of that advice.

pressuredrop_2

IanPt wrote: »

(together with the fact that I can seem to get a more in depth discussion of my options with a few minutes on an internet forum!)

That tends to happen when no commission can be earned.

feesarefare

pressuredrop wrote: »

That tends to happen when no commission can be earned.

Thats why it makes sense to find an IFA that charges fees for advice not product sales.

Id very interested to know from the OP that if on going to see the IFA she said Ill prepare a report and make recommendations for a fee, and then the report said put the money in ILCS whether they would have thought that was money well spent?

sabretoothtigger

When will the money be required. I think higher risk then bonds should be taken as it sounds like the money wont be needed for at least 10 years. Thats a large enough time frame to invest in Asian stock markets which might sound higher risk but over a larger time frame I think it will just represent larger growth then anything relying just on the uk (which makes it less diversified and riskier to me)

I see bonds as over rated in a similar way sub prime debt was over rated. The risks are underplayed and they arent paying enough to justify lending your money to them, 5% fixed for 5 years or whatever is not good enough. The nsi option seems fair if you dont know what else to do

makes me doubt the overall quality of that advice.

nsi dont pay commission and wont be on the list of options available for that reason I guess

IanPt

feesarefare wrote: »

Thats why it makes sense to find an IFA that charges fees for advice not product sales.

Id very interested to know from the OP that if on going to see the IFA she said Ill prepare a report and make recommendations for a fee, and then the report said put the money in ILCS whether they would have thought that was money well spent?

In general I have no problem in paying for advice - I work in IT and charge clients for my advice so I can't complain if an 'expert' wants to charge me for there time!

If they'd come out with advice as simple as that I wouldn't have expected them too have spent much time on it!

IanPt

I thinks there's a bit of confusion here over the term investment bonds, this not corporate bonds it is the L&G Portfolio Bond which is a wrapper for other funds (6 funds suggested including things like Invesco Perpetual Distribution Fund, Neptune Income fund). It's a life assurance based product that seems like it might have some tax advantages in certain circumstance but from what I uinderstand these aren't necessarily good for a non tax payer.

alanq

I was on the point of suggesting Index Linked Saving Certificates as the first reply to the OP. I changed my mind when I read the following on the NS&I website

"Investing for children You can buy Savings Certificates on behalf of children under seven. The child then becomes responsible for them on their seventh birthday."


If control is not to be handed over until the daughter's 18th birthday this does not seem to be what is required.


There is a separate heading about Trustees on the website but but no information I could see other than to contact NS&I. Perhaps formal trusts for children have other rules.

feesarefare

IanPt wrote: »

If they'd come out with advice as simple as that I wouldn't have expected them too have spent much time on it!

But the fact of the matter is the process to give advice doesnt change, irrespective whether the solution is simple or complicated.

All the necesary forms need to signed ,completed, checked filed etc etc.