Best long term investment for child?

Smudger78

Hi,

I am looking to open an investment fund for our 1 year old which we can invest around £50 per month into over the next 15+ years. I'm not adverse to a bit of risk so think an investment rather than traditional saving is the way to go in order to get a reasonable return. The key things I would like in a fund are:

• complete control of when my child gets access to the money
• The ability to use the same fund for another child in the future
• The most tax efficient fund (income and capital gains)
• The lowest operating costs
• Something which I dont have to constantly monitor and change

Not asking a lot I know!

I have done some research and have brochures from Baille Gifford, F&C and Jump/Witton. Does anyone have any advice or experience of making investments with theses providers? Should it be done via an ISA? Which options best fit the key requirements above?

Thanks

Smudge

opinions4u

Wait and see what Junior ISAs offer later this year.

Tammer

opinions4u wrote: »

Wait and see what Junior ISAs offer later this year.

Hi,

I've read that Junior ISAs will give the money to the child on their 18th birthday - the same as Child Trust Funds do just now. This would mean they do not satisfy the first condition that the OP has listed.

OP - do you use up all your own ISA allowance yourself already?

Ark_Welder

Junior ISAs avaialble from 1st November this year. Is it the investment trusts that you are looking at with BG and F&CV? The global ITs of either should suffice. For me, though, I tend toward the BG offerings over F&C due to the investment managers and house style (more growth orientated than value).

[edit]
How do you define 'complete control' over when the child gets the funds? If it to be entirely at your discretion then I can only see having the funds in your own name to be able to meet this criteria - and that then eats into yoyr own allowances.

Reaper

Smudger78 wrote: »

• complete control of when my child gets access to the money
• The ability to use the same fund for another child in the future
• The most tax efficient fund (income and capital gains)
• The lowest operating costs
• Something which I dont have to constantly monitor and change

Not asking a lot I know!

You can acieve all the above with a "discretionary trust" except the lowest operating costs as you will need a solicitor to draw it up.

In my view you are better off compromising on some of the other points instead.

My own choice was Baille Gifford using their Scottish Mortgage fund and the Bare Trust option. The costs are low, performance reasonable, and unlike the others they let you specify the end date you want when setting it up, so I picked age 21 but they assure me as a trustee I can end it sooner if I think my son is responsible enough. However a note of caution that the legal side is unclear and I suspect the child may be able to overturn it in the courts at age 18 if they were determined enough!

You would need to set up another one for future children but it isn't very hard. Just one application form and id.

I have done some research and have brochures from Baille Gifford, F&C and Jump/Witton. Does anyone have any advice or experience of making investments with theses providers? Should it be done via an ISA?

You can't do it via an ISA. If your child qualified for a CTF then you can do it that way. In my case I went with F&C with most of the money going into their F&C Investment Trust fund which has low charges.
If they can't have a CTF then you can do something similar with the Junior ISA at the end of the year.
The advantage of the CTF/Junior ISA route is that income is not taxed, which it is for a child investment when it exceeds £100pa if it was the parent's money (exempt if it came from other relatives plus capital gains is exempt regardless of who it came from provided you set it up as a Bare Trust). The downside of a CTF and likely the Junior ISA is the charges can be higher.

opinions4u

Tammer wrote: »

I've read that Junior ISAs will give the money to the child on their 18th birthday - the same as Child Trust Funds do just now. This would mean they do not satisfy the first condition that the OP has listed.

Indeed. But many will sacrifice perfection for the tax benefits that a Junior ISA is likely to bring when compared to a discretionary trust.

kidmugsy

Stick £100 every couple of months into nsi Index-Linked Savings Certificates. Then if inflation runs away and interest rates are raised spectacularly to counteract it, withdraw the money from all certificates older than one year and put it into fixed interest gilts. They'll shoot up in value when interest rates are lowered again. If consistently high interest rates, or any other cause, leads equities to tumble, consider switching the investment into them: ITs are a good method. Take advantage of any tax shelter where the costs are less than the tax savings.

The beauty of this scheme is that (i) while you wait patiently to try to time the markets, your money is anyway in a superior, minimum hassle, secure bolt-hole, and (ii) you can hold the ILSCs "in trust" just by using the appropriate application form when you buy them.

Judging by the graph in the blog post of 28th July at the link below, ILSCs have outperformed shares over the past decade.

http://broadoakblog.blogspot.com/

Ark_Welder

kidmugsy wrote: »

Stick £100 every couple of months into nsi Index-Linked Savings Certificates. Then if inflation runs away and interest rates are raised spectacularly to counteract it, withdraw the money from all certificates older than one year and put it into fixed interest gilts. They'll shoot up in value when interest rates are lowered again. If consistently high interest rates, or any other cause, leads equities to tumble, consider switching the investment into them: ITs are a good method. Take advantage of any tax shelter where the costs are less than the tax savings.

The beauty of this scheme is that (i) while you wait patiently to try to time the markets, your money is anyway in a superior, minimum hassle, secure bolt-hole, and (ii) you can hold the ILSCs "in trust" just by using the appropriate application form when you buy them.

Judging by the graph in the blog post of 28th July at the link below, ILSCs have outperformed shares over the past decade.

http://broadoakblog.blogspot.com/

'Fixed interest gilts' is a wide market and jumping in to the wrong one at the wrong time could lead to losses. When they do start rising, interest rates could do so for quite a while. Trying to time any market is not easy.

ILSCs might have outperformed in tyhe past, but is that any guide to the future? Works both ways...

kidmugsy

Ah yes, prediction is hard, especially about the future. Still, that's basically my own investment policy described in that comment: timing worked for me in 1987 -2000 so I live in hope of repeating the trick, and meantime think that ILSCs are a wonderful place to lurk until assets are good value again. Whether it would suit the OP and his nippers, who knows? Had I had perfect foresight, I'd have plumped for gold in 2000, but you can't have everything especially if your instincts are cautious.

westy22

I've read that Junior ISAs will give the money to the child on their 18th birthday - the same as Child Trust Funds do just now. This would mean they do not satisfy the first condition that the OP has listed.

My understanding is that the JISA will automatically become an adult ISA at age 18 - unlike the CTF which 'cashes-out' at 18. Still means it is your child's money though!

Reaper

westy22 wrote: »

My understanding is that the JISA will automatically become an adult ISA at age 18 - unlike the CTF which 'cashes-out' at 18.

I can find web sites that say CTFs can convert to an ISA at 18 and ones that say they can't! If anybody can find a definitive answer on a government web site I would be interested to see it.