Top Junior ISAs guide: discussion

jamesd

caelshorn wrote: »

I read an article that SIPPs are a good investment for kids. I quite like the idea of the money being available once they reach 50, rather than 18

No current SIPP lets you get at the money at 50. The minimum age is currently 55 and it's likely to be higher in 55 years.

SIPPs aren't a good choice compared to a JISA because a JISA is available a little before the child will need a property deposit. And that property deposit will save them a huge amount of money in rent that they aren't paying over the years until they reach 55+.

They have a legal right to become the person who manages their JISA account from age 16 but they can only do that if they know it exists. So don't tell them if you want them to wait...

westy22 wrote: »

I'm sure that I've read somewhere that this is a valid loophole and 16-18 year olds can benefit from having both a JISA and an adult ISA in the same year. I suspect that if this is true HMRC will waste little time in closing the loophole!

It's not a loophole, just the way the legislation works. HMRC documents it in their Guidance Notes for ISA Managers publication.

jamesd

MrGumby wrote: »

You could do worse than look at Hargreaves Lansdown as a provider, if you do go for a SIPP. They provide an excellent service with very low fees. (I have absolutely no connection except as a customer!)

HL doesn't have very low fees. They charge the full, undiscounted, retail annual management charge and take about half of that for themselves, with the fund manager getting the rest. That's a good deal for small fund sizes because they have no annual charge but as the size increases it gradually becomes uncompetitive.

Their JISA also charges the full retail annual management charge, unlike their adult S&S ISA.

They are fine for starting out, though - helpful and with lots of investment choices. Their HSBC tracker funds are also inexpensive and it's unlikely that anyone with a JISA wll end up with enough money to be able to get a better deal on trackers - 0.1% instead of 0.28% is available elsewhere but that difference is small enough for the annual fee charged elsewhere to be greater than the likely saving on the annual fund charges.

MrGumby

jamesd wrote: »

SIPPs aren't a good choice compared to a JISA because a JISA is available a little before the child will need a property deposit.

"A little before"? It seems that most people delay buying their first house until they're 25-30 or more, these days. And they'd need to have a very sizeable ISA to get anywhere close to a worthwhile house deposit. Not that I'm necessarily arguing for SIPP vs. JISA.

jamesd wrote: »

They have a legal right to become the person who manages their JISA account from age 16 but they can only do that if they know it exists. So don't tell them if you want them to wait...

Quite right, and that's what I'd be inclined to do. If, though, the JISA is a gift from someone, e.g. a grandparent, the giver might want the child to be aware of the gift.

jamesd

More like 35 as the average age of a first time buyer these days. Lack of deposit money is a big issue and a JISA can help with that. Doesn't need to be a house as first property and it's easy enough in many parts of the country to build up a flat or even house deposit in a JISA. Harder in London and parts of the SE.

competitionscafe

MrGumby wrote: »

There are various incentives on offer, e.g. Jump (Witan) is offering a £25 John Lewis voucher for a £250 lump sum or £50 monthly/quarterly DD in a cash or investment ISA.

With an investment ISA, however, you have to take fees into account. Jump charges an annual management fee of £30 + vat p.a. which would tend to wipe out any gains on smaller investments.

By contrast, Hargreaves Lansdown offers no gifts but charges no fees either (on funds and cash, that is - 0.5% p.a. on other investments). Actually, it isn't quite that simple, but that's the gist of it.

The HL offer seems preferable, unless I'm missing something.

This is clearly a big subject that needs careful thought before buying, at least before buying a Junior investment ISA.

A global investment trust is a good idea - you could buy via x-o for example and pay no annual JISA fees (although dealing fees would make monthly savings or small lump sums expensive).
http://www.x-o.co.uk/enquiry/jisa_info.htm
http://www.candidmoney.com/reviews/candidreview.aspx?CandidReviewID=33

For funds, HL do not rebate any annual trail commission on funds in a JISA, so if you wanted to invest in OEICS rather than investment trust/s you would probably be better off with Cavendish (Fidelity platform) as they rebate the full trail commission on funds which pay one. They have a one off £25 charge but no annual charges or fees for an ISA/JISA wrapper. HL are also more costly to transfer from once you are in.

What makes deciding on the lowest cost stocks and shares JISA or ISA complicated is that there is no one cheapest provider - it depends on wether you invest monthly or an annual lump sump and on the amounts of those investments, how frequently you switch funds, and wether you choose passive (tracker) funds, actively managed funds (open ended or IT's) or even individual shares - or a combination of any of those.

I found for me the easiest and most cost effective option (for an adult ISA) was to use one provider for funds and another one for IT's and shares (in seperate years obviously) but as to which one is best for you will depend on the variables listed above.

MrGumby

Thanks, competitionscafe, that's really helpful. I wish I'd read it a good few years ago!

twingo100

Does anyone know if it is possible to get a Junior ISA where i can invest in indivual shares

competitionscafe

twingo100 wrote: »

Does anyone know if it is possible to get a Junior ISA where i can invest in indivual shares

http://www.x-o.co.uk/enquiry/jisa_info.htm is probably the cheapest -although their interface is rather basic it does the job. I don't think Sippdeal or idealing have JISA's (yet) but they may be options if they do in future.

jamesd

Hargreaves Lansdown is one. Most stocks and shares JISAs should allow direct share investing.

thelawnet

jamesd wrote: »

HL doesn't have very low fees. They charge the full, undiscounted, retail annual management charge and take about half of that for themselves, with the fund manager getting the rest. That's a good deal for small fund sizes because they have no annual charge but as the size increases it gradually becomes uncompetitive.

Well,

Trades: £11.95/each
Shares: 0.5% of value to £45/year (so £5 on £1000, £45 on £9,000, £45 on £90,000)
FX Charge: 1.75% up to £10k

Their JISA also charges the full retail annual management charge, unlike their adult S&S ISA.

Indeed, they do not rebate any part of the typical 0.5% trail commission.

I had a look at my daughter's CTF, which is £25/month into F&C Investment Trust made direct with F&C.

Her balance was £1415.10 as of 31 May 2011, after subscriptions of £1175, which is not too bad considering the price today is still below what it was when I first started paying money into the fund.

A Junior ISA with HL would be very expensive for this, as they would charge £11.95/month to make the regular subscription purchase.

My son has an M&G Index tracker fund, the TER is 0.46%, I put £25/month in that also, direct with M&G, just realised though that they have my old address, so have just written off to change it!

HL would charge me 0.5%/year to hold this so not really a good idea either. On £10k over 18 years at 7% instead of 7.5%, this would reduce the final value from £36.8k to £33.8k, £3000 or 8% of the total.

Not cheap at all - for a child with typically a small regular subscription, there's no need to have a 'fund supermarket'.