16 year old son has £15000 to invest..

dunstonh

My 16 year old son has been left some money and he wants to invest £15000.

Do you have the authority to tie your sons money up for the next 50 years? If the money was left to him and you are acting as trustee, then you should be looking to hold the money until his early 20s.

Putting the money into a stakeholder pension, which will be basically an obsolete product after 2012 with the introduction of the NPSS, means your son will not benefit until late in life when he may not need the money. Whereas the benefits in his 20s (such as property deposit) could be far more beneficial.
If you do decide to go with the pension, then consider the length of time it will be invested and the type of investments it should go in. It will be the ultimate long term investment and most stakeholders are very limited in investment choice. A personal pension or SIPP may be the better option and many personal pensions can actually be cheaper than stakeholder pensions. Personally though, if you are looking to invest, then unit trusts or investment trusts give you flexibility of choice and investment style.

gmanNL

Could consider a 1-2k allocation to Premium bonds, or Indexed Linked savings.

benood

Of course you wouldn't want to put all £15k into a pension that would severely cramp his options in the nearer term when the money doubtless will be useful, however I still think that locking 15% of it into a pension of some sort would pay dividends years ahead.

The figures I quoted are without any further contributions - of course in 50 yrs time those sums won't buy as much as they do now due to inflation but they do show the power of compound interest! Over the period you would need to keep the fund on review and I would certainly take financial advice on an appropriate fund but you will want to check performance every 5 yrs or so.

As his trustee perhaps you could suggest this to him and get his buy in as part of your decision making.

dunstonh

Of course you wouldn't want to put all £15k into a pension that would severely cramp his options in the nearer term when the money doubtless will be useful, however I still think that locking 15% of it into a pension of some sort would pay dividends years ahead.

As trustee, is there the authority to do that? Did the will state that he couldnt have the money until age 55 at the earliest?

benood

dunstonh wrote: »

As trustee, is there the authority to do that? Did the will state that he couldnt have the money until age 55 at the earliest?

DH you're being very cautious, but fair enough to make the OP aware. Quite possibly the OP's son will come to control the funds when he's 18 - in my view there is a risk that he will cash in the funds, buy a fast car and write it off the next week - money gone. The trustee has a moral duty to consider this outcome too. Furthermore would the son actually sue his parent for £2-3k? - a remote possibility in my view, especially if they'd discussed it beforehand.

dunstonh

I am being cautious but I know someone that took a trustee to court and won because they didnt invest it in their best interests. The trustee never sought advice and stuck it in products that were not suitable. That was a father and son.

Most trusts would see the money coming available at 21-24 not 18 unless there were instructions left in the will to say otherwise. If the will doesnt say that the money is to be made available at age 55 at the earliest, then is the trustee putting themselves at risk by doing that?

Plus, is the pension really the right thing to do? inflexible, subject to Govt meddling, and most of the tax advantages gone.

plonkee

I probably wouldn't suggest putting it into a pension in these circumstances. If he's planning on going to University it might be difficult to legally get around the rules on his contribution to his studies.

Don't forget that you don't have to do the same thing with all the money. Perhaps put £3000 into a cash ISA, £6000 into 3 year index linked bonds, and most of the rest into high interest rate savings accounts. Maybe you could invest a little of the money into something more adventurous (like shares or a unit trust) just to see what happens.

benood

If it were me I still think the pension could offer a good home for £2-3k - I'm assuming that the contributions would be grossed up by the basic rate of income tax - is that right? Was your example litigation over £2-3k DH - surely this must have been over a larger sum?

I'd be surprised if a pension has to be taken into account for university fees.

masonic

Are savings now taken in to account, then? That would mean the end of stoozing student loans! :eek:

jinkssick

Jonbvn wrote: »

NS&I index linked savings certificates are looking pretty good ATM, with a high RPI. Invest for 3 or 5 years all tax-free.

this is by far the best bet. its even :money: choice.