Bare trust investment for kids

gemma.zhang

Grandparents want to give some gift money to my two kids. After consulting financial advisor. The best one seems to be bare trust.

Want to do some DIY investment with this money. Not too much, a few k and I am thinking about investing regularly with 100 each per month. Have done some search, seems HL can help with bare trust form, also fidelity. Although HL charges more service fee 0.45%, but really like their platform and portfolio+ service which does auto rebalancing and looked after, however at the cost of 1.45% annual charge.

Wondering if any other fund platform apart from above two does the bare trust so I can compare?

Thanks!

xylophone

The children will have the right to access and control of the money in a bare trust at the age of 18, just as they would in a CTF/JISA - is there a reason why the CTF/JISA is not being used?

CTF is now transferable to the more flexible JISA.

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

That said, you might consider using an investment trust in bare trust see FAQ http://www.sit.co.uk/private-investors/products/stockplan-a-flying-start

http://www.bgchildsavings.com/pages/how_to_invest.aspx

gemma.zhang

The big difference is: I can use the money for kids purpose like school fee before 18. As ISA, it can't be taken out before 18

xylophone

The big difference is: I can use the money for kids purpose like school fee before 18. As ISA, it can't be taken out before 18

See http://www.sit.co.uk/private-investors/products/stockplan-a-flying-start

FAQ How do I sell shares from my Stockplan A Flying Start under "Bare Trust"

bowlhead99

Yes, the form of trust document used by SIT is pretty similar to the ones used by other investment houses, and pulling money out of the account to spend on maintenance /education / benefit for/of the child is perfectly allowable. It's the child's money so it can be spent on child's education before 18, which is something you couldn't do with a JISA.

You'll find a few brokers or platforms which have their own bare trust documentation or will just generally open up an account for a trust you've set up yourself (which includes a bare trust).

However, if you're not going to take an active role in managing the money, you don't need full 'platform' services with a wide range of investments. A plan direct from a fund manager that just has you investing in one - or a few - investment trusts operated by that fund manager, would seem to fit the bill. If HL are going to charge a 0.45% platform fee, plus the costs of the individual funds, or 1.45% all-in for their enhanced service, it seems you'd be spending money unnecessarily.

You haven't mentioned the timescales involved but if we're talking about, say, 15 years, then £1000 might turn into almost £2800 through compound growth at 7% a year. But if you buy platform and management services from HL and end up spending a percent more than you need to... you only make 6% a year which turns your £1000 into just £2400 in the same time period.

So getting a percent extra performance through lower annual fees, increased the profit by over 25%. Obviously the exact fees depend on what specific investments you hold and some may have higher returns than others, some may have lower volatility (less up and down) and so on. But personally I wouldn't pay 1.5% for a managed service from HL for a few thousand pound investment; I would just buy one or two actively managed funds and maybe look at them every few years. And if I was wanting to be self-managing and choosing my own investments from a very wide range and changing them frequently, I wouldn't do it on a platform that charged me as much as 0.45% a year just for platform access to the investments which have their own charges. So for me, both of the services from HL would be out.

The example of direct investing into an investment trust (in bare trust) like xylophone linked can be a reasonable option. But some fund manager groups offer multiple investment trusts to invest in and swap between if you like, over the life of the investment plan. Baillie Gifford would be one, their childrens plan can be done as a bare trust:http://www.bailliegifford.com/documentgateway.aspx?_id=A112736077F24F60869AECB10A65E28D&_z=z&download=go

Also F&C is another popular name in the industry as they have a variety of investment trusts available that you can put in a child plan; they do have a fixed annual admin fee, so if you were only putting tiny amounts in, it might not be ideal as fixed fees cost relatively more for small investments.

gemma.zhang

Thanks for your detailed information, will take a look at both companies you mentioned.

I quite like to check investment and change from time to time. So platform would be useful. However, would like a fund company who can actively manage it for us over the next 5-10 years or so. Any pointers for actively managed balance fund? Portfolio that does auto-balancing etc.

We don't have specific timeline in mind. But would be for school fees etc.

xylophone

When will you require the school fees?

atush

I used Witan and F&C for my kids.

If the eldest will go to school in a few years, i'd keep some cash uninvested.

gemma.zhang

xylophone wrote: »

When will you require the school fees?

Maybe in 5 years, definitely in 8 years.

atush

I years in cash the rest invested?

xylophone

You have decided on the school the children will attend and know the current fees? These will almost certainly increase well ahead of inflation over 5-8 years - presumably the grandparents' gift is intended just as a contribution rather than expected to cover the whole?
http://www.candidmoney.com/calculators/school-fees-affordability-calculator