Looking for an Index based structured product within a child ISA?

gallygirl

Does anyone know if such a thing exists?

Am trying to find a lower risk option for my great-niece - my nephew knows someone whose child 'lost everything' - I'm guessing they got a child trust fund or similar around 2007 and sold out in 2008/9 - and he doesn't want to take risk so looking to just open a cash ISA. Hoping once I show him the effects of even a small amount of inflation over interest rates he will consider something else - but can't find anything!

If not index linked then something like a global fund, as long as possible losses are limited.

Or does the potential loss of growth mean he'd be as well going for a cash ISA - say 2% at Bank of Cyprus?

Thanks.

jimjames

The answer to not "losing everything" is not to sell in a panic. Even then you wouldn't have lost "everything", worst case from peak to trough would have been around 40-50% IF you had bought and sold at the worst possible times. If you'd waited a year or two all that ground had been recovered and by now you'd have doubled your money compared to 2008/9.

Depending on the ages structured products might not be suitable, they tend to have fixed timescales but you really would be better off just biting the bullet and not selling just because it drops a bit.

There are unlikely to be any funds that give guarantees of specific losses being limited, the only ways would be mixing bond funds with equity funds or total return funds - there's already a thread on those today.

gallygirl

jimjames wrote: »

The answer to not "losing everything" is not to sell in a panic. Even then you wouldn't have lost "everything", worst case from peak to trough would have been around 40-50% IF you had bought and sold at the worst possible times. If you'd waited a year or two all that ground had been recovered and by now you'd have doubled your money compared to 2008/9.

Depending on the ages structured products might not be suitable, they tend to have fixed timescales but you really would be better off just biting the bullet and not selling just because it drops a bit.

There are unlikely to be any funds that give guarantees of specific losses being limited, the only ways would be mixing bond funds with equity funds or total return funds - there's already a thread on those today.

Thanks - I agree with what you say - but they don't! I have found some low risk funds that mix equities, bonds, cash & property - but they are still not happy.

xylophone

How old is your great niece?

gallygirl

2 weeks

I know it's a long term investment etc etc but I can't convince them, hence looking for some kind of guarantee.

bowlhead99

gallygirl wrote: »

2 weeks .

Bloody hell !

I know you know this but the key feature of a JISA is the child cannot get it for the next seventeen years and fifty weeks. The child will not need it back when a structured product matures in three years nor for five renewal terms after that. I guess if they found a five year product they would only need to roll it over after it expires three times over.

It would seem to be a nonsense to use a succession of short- to medium- term structured products to limit returns and downside over a two decade timeframe. Furthermore, another feature of a JISA is that you can only have one of them running at once. And a typical structured product with capital protection, by its nature requires a lump sum of capital to protect and then no further additions for the term.

So, if they kick off a structured product rather than a "conventional" investment they will be precluding themselves and other kindly friends and relatives making contributions until the term completes.

I guess the plus side from your perspective is that you won't feel stingy for not contributing to the child's investment fund yourself at birthdays or Christmases because they shut the door to new ongoing investment.

Still, each to their own

Mistermeaner

I'm planning to move my son's s+s trust fund (with family investments at 1.5% \ annum) to a jisa in April, but not decided what to invest it in yet.

My son is 8 and current value is 8k

A bit like you I'd like something ' low risk' but better than cash and not sure what that is.

Was think life strategy 40 or l+g multi asset 3/4 but bond allocation doesn't give me confidence.

Would love to hear others thoughts on appropriate investments.

On a side note I generally think jisa 's and ctf' s are a bit pointless now given interest rates are so crap and government incentives have gone.

I'm not planning on specifically topping up what is already in the boys pot but will earmark a portion of my general savings for him (it's all his when I die anyway) - struggle to think of any advantage the j brings (unless your maxing limit on isa already)

xylophone

https://www.gov.uk/junior-individual-savings-accounts/overview


"How Junior ISAs work

There are 2 types of Junior ISA:

a cash Junior ISA, eg you won’t pay tax on interest on the cash you save
a stocks and shares Junior ISA, eg your cash is invested and you won’t pay tax on any capital growth or dividends you receive

Your child can have one or both types of Junior ISA."

Perhaps the OP could persuade the nephew to hedge his bets by using both the S&S option and the savings option.

Example http://www.halifax.co.uk/isas/cash-isas/junior-cash-isa/

http://www.halifax.co.uk/investments/our-investment-products/junior-stocks-shares-isa/

Keep_pedalling

xylophone wrote: »

https://www.gov.uk/junior-individual-savings-accounts/overview


"How Junior ISAs work

There are 2 types of Junior ISA:

a cash Junior ISA, eg you won’t pay tax on interest on the cash you save
a stocks and shares Junior ISA, eg your cash is invested and you won’t pay tax on any capital growth or dividends you receive

Not quite true, only higher rate tax payers save tax on dividends for stocks held in ISAs the 10% basic deduction is removed at source and cannot be claimed back.

Eco_Miser

Keep_pedalling wrote: »

Not quite true, only higher rate tax payers save tax on dividends for stocks held in ISAs the 10% basic deduction is removed at source and cannot be claimed back.

There is NO TAX DEDUCTED at source on dividend payments. Tax may have been paid on the company's profits, but that happens whether or not the dividends are distributed.

The 10% tax credit is 10% of 10/9 of the dividend. and so exactly represents the amount HMRC notionally ADDED to the dividend, before taking it away again.

So base rate tax payers don't pay tax on dividends in an ISA - or out of one, so they don't save tax either.

bowlhead99

Keep_pedalling wrote: »

xylophone wrote: »

a stocks and shares Junior ISA, eg your cash is invested and you won’t pay tax on any capital growth or dividends you receive

Not quite true, only higher rate tax payers save tax on dividends for stocks held in ISAs the 10% basic deduction is removed at source and cannot be claimed back.

No, It is completely true. You will NOT pay tax on any dividends received. NO tax is deducted at source. However many pence per share is declared and paid by the company to its shareholders, is exactly what you receive in your ISA and no tax is payable by you.

However, if the child is not a higher rate taxpayer they would not have paid tax receiving the dividends outside an ISA either.

You are confused by the notional tax credits which are simply numbers imputed by HMRC and incentivise investment generally by making dividends tax free for basic taxpayers and non taxpayers (and taxable below the usual marginal income tax rates for high and additional rate taxpayers).