£50 a month Stock n' Shares ISA

scottpa100new

Hi everyone,

I become a Dad later this month and so I am thinking about the baby's future. I am planning on saving £50 a month for say 10 or 12 years in stocks and shares. This is because it is a long term plan and whilst we can not guarantee returns, the train of thought is that long term it should be okay. After that 10 or 12 years, then move the money into a cash ISA to reduce the risk ready for the child (now young adult) can have the responsibility to do what is required with the money.

I don't want to go Junior ISA because the money becomes the child's responsibility at the age of 18. I am hopeful that my child will be a well rounded individual by that age, but just in case, I want to keep my options open.

What I am struggling with is understanding how the running of the account is done. I can see on a page from The Telegraph (I am unable to link - site won't let me)
that funds have different prices etc. I am thinking of going Cavendish as MoneySavingExpert also recommends them.

I think that I select a fund or funds. Then Cavendish just distributes money received in (£50 a month) into the funds. So if I have one fund, after fees etc, £50 into that one fund. If I have two funds, £25 into each fund. And so on. Is that how it works?

If so - does that mean my ISA account number etc stay the same year in, year out? My only experience so far is with Cash ISAs and I know that they do change year in year out.

If the account does stay the same, I'm thinking that's useful if Grandparents or whoever wish to give the Baby A some special savings.

Lots of info and big questions. I'm not after outright recommendations - I'm just trying to work out how it all works!

Many thanks


Scott

innovate

An S&S ISA is a great choice if you are looking at a 10-year + timescale. If you use your own ISA allowance for it, though - what are you going to do about your own ISA savings/investments?

You should really be reading up about investing because that is what S&S ISAs are all about. There are various books and websites that people mention- "Smarter Investing" by Tim Hale and http://monevator.com/category/investing/ being a couple of the usual ones. A passive investment approach could be the best thing for you since you sound a complete novice to investing. This can make it easier to make your initial investment decision, and to manage the investment over the years.

With a £50/month budget, your top priority must be to keep the charges at an absolute minimum, for both, the investment and the platform. Splitting your £50 across more than one investment could add unnecessary costs if the platform charge a fixed price for dealing. Similarly if you make a lot of trades.

You are right to look at funds rather than shares, and your first job (after you have done a lot more reading) should be to select a fund. http://www.trustnet.com/ is a great tool for fund selection, but you might choose to follow one of the monevator suggestions.

Once you know what you want to invest in, find the cheapest broker. Cavendish may or may not be your best option. There is a decision making tool by MSE user snowman that will help you to compare platforms - come back and search for it once you know what you want to invest in.

westy22

scottpa100new wrote: »

Hi everyone,

I think that I select a fund or funds. Then Cavendish just distributes money received in (£50 a month) into the funds. So if I have one fund, after fees etc, £50 into that one fund. If I have two funds, £25 into each fund. And so on. Is that how it works?

Not quite. When you sign up with Cavendish they will establish an account for you with Fidelity FundsNetwork. From then on it is really Fidelity that you deal with day to day. You would complete a Fidelity DD form saying how much is to be contributed each month and how i.e. what fund(s)you want it invested in.

If so - does that mean my ISA account number etc stay the same year in, year out? My only experience so far is with Cash ISAs and I know that they do change year in year out.

Yes, one account number will cover all subsequent subscriptions.

If the account does stay the same, I'm thinking that's useful if Grandparents or whoever wish to give the Baby A some special savings.

Yes, Fidelity will accept one-off debit card subscriptions as well as your regular DD.

Hope that this helps.

scottpa100new

innovate wrote: »

An S&S ISA is a great choice if you are looking at a 10-year + timescale. If you use your own ISA allowance for it, though - what are you going to do about your own ISA savings/investments?

My wife and I are people of modest means. The normal ISA limit was more than enough and now with the £15,000 limit there is more than enough room. We place our ISA savings in my wife's name. I have a P2P savings that I have been running with Zopa since 2007 and that's burbling along nicely. I am waiting to see what the Government announce regarding P2P ISA status in 2017. I am hopeful (read want!) that P2P will just be another vehicle like cash and S&S within a total 15,000 per annum limit. That way I can keep my Zopa and then a separate Baby account that happens to be in my name.

Thanks for your feedback.

bowlhead99

In the 'old days' (from when ISAs first came in, until about 2005) you could have 3 components to an ISA - S&S, cash and insurance-based products.

But then they stopped allowing the insurance component and rolled it into the S&S component to give it the same treatment as other collective investment schemes.

If peer-to-peer collective lending is eventually allowed under an ISA umbrella, I'm not sure they would create a whole new category for this. They have already cut down from 3 categories to 2 and the general philosophy is to try to keep things simple (as they have recently announced with the changes in July, e.g. transfer between cash and S&S now goes both ways, cash having equal ability with S&S to use the full annual limit, etc).

They wouldn't put p2p lending into the cash bucket like a straight bank deposit, so it would make sense for it to go into the S&S bucket - as a collective debt investment scheme which carries potential to beat cash deposits and has some risk.

This is of course speculation. But if this happens, you might be a little stuck, with your low value of shares for the baby 'blocking' you from making your own tax efficient investments with a different provider. The result of that might be that you choose to close your small S&S account with Cavendish or whomever and do things differently.

Of course at that stage the small amount built up could easily fit into that year's JISA allowance or whatever, or simply sit as unwrapped fund investments if you're not high rate taxpayers anyway. I only mention because putting the bare minimum into a monthly investment plan for a couple of years and then cancelling is not necessarily efficient if there are exit charges or any fixed admin fees in those first couple of years while the total value is low. So, consider that when choosing a provider.

nad33m

I would say take a look at http://www.iweb-sharedealing.co.uk/products/Self-Select-Stocks-and-Shares-ISA.asp they are run by Halifax and charge £25 account opening fee, after that there are No annual administration charges, and just £5 to switch funds. I transferred my cash isa from Santander and my fidelity s&s to them and am happy with the website and simplicity of their online system. Their online chat is very helpful in sorting out any issues or questions. Selecting a fund or funds is really up to you on your risk to reward attitude.

darkvader

Could I make a suggestion to make it simple for the first few years?

Given you plan to only invest £50 a month, it will take a few years to build a sizeable sum. Since it is for long term growth, you can open a normal investment account that has no charges and invest in growth funds. This way you dont get paid the dividend and save on any taxes as is not in an ISA. Let the money keep growing for a while. There is also no fees to pay as most non ISA investment accounts are free of charge.

Once the pot grows to a sizeable amount or you increase it to £100 a month, at that time move it into an ISA. Helps you save some £££s for the first few years and not pay the investment platform

All the best, I am planning something similar for my godchild and opening an account with Aberdeen for £50 pm

DV

kidmugsy

You could do worse than look at the Junior ISAs and the Children's Investment Schemes offered by the management companies of Investment Trusts. See, for example, p50 or p51 of
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats31Mar14.pdf

If you are certain that you don't want the money automatically to go to the young shaver at 18 you could always open an investment scheme in your own name - p44 - or an ISA - p47.