I have £10,000 for my 18-year old - help!

ruthmc_2

My son turns 18 this summer and I want to set up a (preferably one-off) long-term investment of £10,000 for him in his name. My ideal would have been a NS&I stakeholder pension or Investment ISA or long-term bond but these aren't available. I kind of trust him not to access it for short or medium term uses. I want to avoid on-going commission to an IFA. You can see I'm risk-averse! It's really seedcorn for a pension I guess. What would you do? Many thanks!

opinions4u

I'd keep it in my own name and change my focus from worrying about his pension to helping him get on the housing ladder as and when he's demonstrated stability in his life and an ability to support himself and save his own house deposit.

I think it will be more appreciated then as well.

atush

Or you could help him set up an ISA, one that is fixed for 2-5 years for half the money, investing the other half in a savings bond (or if you are looking at 5 yrs plus) a S&S ISA gain- in his name so that you don't use up any of your own ISA allowances.

That way, the money is his, but he can't get wasy access to it for a time.

Otherwise, if you don't trust him now, don't give it now. And not much point in investing in a pension for him if you want him to be able to access the funds for a house deposit or other medium term goals.

ruthmc_2

Many thanks to both.

buffman

Are there not Inheritance Tax issues with giving him £10k?

Russe11

Pension! if my parents did that for me at 18, i'd of not been happy...

In my eyes if they had put it away in fixed term low risk investment, i'd of been happy to see it try and maintain its value and give me a goal to work torwards in making use of it when the time came, by working and saving knowing i'd get that boost for either a property, boat or business investment etc.

Anything other than locked away for years making the pension providers rich.

(If time travel was possible, apple shares would of been No1 selection)

cashbackproblems

Pension are you serious?? He can do that once hes working through employer schemes.

His first priority should be education or if hes working property ladder and 10k would go some way towards a deposit for a flat/house.

WelshSun

I agree with the last two posters.

Priority 1 should be education (if he wanted to do a masters degree, for which there are no students loans (as in standard student loans) and very few scholarships (those that do exist also dont tend to pay much)) also some help towards living costs especially if he lived in London.
Priority 2 should be getting on the property ladder.

While a pension is important, I wouldn't.
For now keep it in the highest rate interest account possible or split it between long and medium terms bonds (3 and 5/10 years) for a good rate.

ruthmc_2

Thanks, lots of useful perspectives so far.
My understanding is that any gift to family is inheritance-tax free as long as you survive 7 years.
I guess how you see the value of pension savings depends a lot on your age!! Point taken - he may thank me more for property deposit or Masters funding.

kidmugsy

The others are right - the time for pensions is when he gets "free money" from an employer's contributions, or when he's avoiding higher rate income tax.

For a Cash ISA keep an eye on Birmingham Midshires to see whether they issue another 5-year inflation-linked product. For a Stocks and Shares ISA consider one devoted to one of the retail bonds that have become popular recently - these would involve a tie-up of 5 years or a bit more. Or, if he's not going to be taxpayer for the next three or four years, consider a non-ISA fixed rate or inflation-linked account instead of the Stocks and Shares ISA.