Long term investment / savings

Accountant_Kerry

Hi All, a bit of advice please.

I am looking to gift my daughter of 4 months around £100k on her 21st birthday (later if she isn't responsible enough) to put towards a house etc.

Anyway, I realise savings accounts are not the best way to do this but know little about investing, any advice?

Thanks

Reaper

Tax is a bit of an issue. If you have not already used up your stocks & shares ISA allowance (and it does not sound as if you have) then you could open one in your own name and put investments in that.

Advantages:
* No tax to worry about as it grows
* Complete control because it is in your name not hers so you can hand it over whenever you feel like it, or not at all.

Disadvantages:
* If you die before handing it over or within 7 years of doing so there may be an inheritance tax bill for her to pay (if your total estate reaches the thresholds at the time)
* If you die before handing it over it won't necessarily go to her unless you have been careful to specify it is to do so in your will.
* You can only add £5100 to it this tax year. However you can add a similar amount in future years and the limit is meant to start rising with inflation from now on.

The alternative is to use a specialist children's investment. I used Baille Gifford putting most of the money in their Scottish Mortgage fund.

Advantages
* Depending on which option you go for (Designated or Bare Trust) it is either flexible or good for avoiding inheritance tax.
* Despite what that page I linked to says it does not have to end at 18, you can choose any date you want for it to finish.

Disadvatages
* The government may get its hands on some tax. If you use the Bare Trust option growth is ok as the capital gains will count against your daughter's allowance and she is not likely to be making use of it for anything else, however if the investments generate more than £100pa interest then the income tax will be due on it as it is were your money not hers (not very fair but that's the rules). It's a special rule for parents putting in money and it would not apply if it was grandparents, friends etc contributing. That sneaky income tax rule also applies to savings accounts.

Accountant_Kerry

thsnks, stocks and shares isa isn't something i use and is definately worth looking into.

Procrastinator333

I like these:

https://www.zopa.com

http://www.fundingcircle.com/

Certainly not saying stick £100k in there, but if it were me, I would put a nice chunk in there.

If it is being locked away I would also put a decent piece in rpi + 50%:

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#guarantee

Then some in stocks and shares, some in a cash ISA, some in fixed bonds and also keep a piece of it as instant access cash so that if a good investment does come up you can take advantage.

Anyway, thay is just me!

Reaper

Accountant_Kerry wrote: »

thsnks, stocks and shares isa isn't something i use and is definately worth looking into.

If you are happy to choose your own investments then a pretty cheap way to do it is to open a S&S ISA account with Hargreaves Landsdowne (or any of the other discount brokers) and then choose some funds to put in it. They refund you many of the charges.
However if you are not comfortable choosing your own investments then you will need to see an IFA.

sunil1234

Procrastinator333 wrote: »

I like these:

www.zopa.com

http://www.fundingcircle.com/

Certainly not saying stick £100k in there, but if it were me, I would put a nice chunk in there.

If it is being locked away I would also put a decent piece in rpi + 50%:

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#guarantee

Then some in stocks and shares, some in a cash ISA, some in fixed bonds and also keep a piece of it as instant access cash so that if a good investment does come up you can take advantage.

Anyway, thay is just me!

mate, i think the OP wants to grow a sum of money to £100k at 21yrs old, not invest £100k now.

Accountant_Kerry

Hi, thanks for your input,

i do want to grow an investment to £100k admittedly i am only starting with £1k at the moment, but will of course be adding to this substantially over the coming years.

As I am thinking of investing over a long period, i was thinking maybe to start £500 of Lloyds shares and £500 of BP shares to start my portfolio. I appreciate that these may not be the most adventurous but am guessing that if i hold onto these for the long term they are likely to return to their previous level plus potentially some dividends. As i said i am very new to this so if this is a really stupid way to start please let me know. I will be starting to read the financial press again (something i haven't done since studied for my accountancy exams!) so hopefully will become more educated as time goes on.

Procrastinator333

sunil1234 wrote: »

mate, i think the OP wants to grow a sum of money to £100k at 21yrs old, not invest £100k now.

Oooopppsss....

In that case, with £1k to get the ball rolling, personally I would start with the safer assets. I also think there is a definate policy of letting inflation run for a few years and so I would stick it in that rpi + 50% bond for 5 years.

Reaper

It is a matter of opinion but I would not use savings accounts for a 21 year time period. Investments ought to do much better over that length of time, which is what the OP is sensibly planning to use.

Accountant_Kerry

I think i have made up my mind, (which is rare for me!) regular savings accounts for 12 months at the end of each period I will then withdraw the money and invest the lump sum in unit trusts and shares via a S&S ISA.

sunil1234

Accountant_Kerry wrote: »

I think i have made up my mind, (which is rare for me!) regular savings accounts for 12 months at the end of each period I will then withdraw the money and invest the lump sum in unit trusts and shares via a S&S ISA.

hi, don't do that. Go straight to monthly in the ISA, that way you get pound cost averaging of the shares/ units bought rather than a lump sum that will be bought at a single point and could be expensive re cost of buying in