Prudential Onshore Bond?

sherpa_2

My daughter (aged 6) was lucky enough to be left £128,000 by my aunt when she died. I finally got the paperwork through and I find that it's invested with the Prudential Onshore Bond. I know nothing about investing beyond tracker funds and ISAs, is this a good idea? The charges from prudential are not very high, but we also paid c£1500 to the financial advisor, which seems to be the complaint with bonds. Should I be trying to move this money?

Thanks for any advice!

redmalc

The bond will not be allowed to be novated to your daughter because there is a clause which says you must be 18 years of age to hold one

Linton

The bond is a tax wrapper like an ISA or a pension and can hold a wide range of investments. It's the investments which will determine the risk and the return.

It may well be helpful for you to understand how and why the money is invested. But if you got too deeply involved ...... how would you feel if it was your responsibility when the markets crashed and a significant amount of money was lost? There are advantages in having a dispassionate third party around.

dunstonh

I know nothing about investing beyond tracker funds and ISAs, is this a good idea?

As your daughter is aged 6, the use of a bond is more typical than ISAs which cannot be held under trust.

he charges from prudential are not very high, but we also paid c£1500 to the financial advisor, which seems to be the complaint with bonds.

Why would the £1500 advice fee be a complaint about bonds? The two things are not linked. The adviser was selling advice. The fee was for the advice. If the advice was to use ISA then the fee would be the same.

Should I be trying to move this money?

What would you move it to? (noting that you have to comply with the Will).
Who are the trustees? What knowledge do they have with handling investments for a beneficiary?

sherpa_2

Well this is fairly reassuring, thanks.

Yes, the money is held in a trust for my daughter, and within the bond the money diversified in a number of prudential funds. I just wasn't sure whether this kind of investment vehicle was a byword for a ripoff - the compulsory fees for Prudential are not that high, but there are several more added on, including the advisers fee, which in total mean that the value of the fund dropped from £128k to £123k in a year. And when I googled onshore bonds I found an article in the Independent (I'm not allowed to link to it by the board) with criticism including this:

"She's not alone in being worried about the mis-selling of the bonds. "I don't see a role for onshore investment bonds other than to pay large commissions as high as 8 per cent to advisers," says Danny Cox of the Bristol-based wealth manager Hargreaves Lansdown.

"Many insurance company bonds are designed to confuse the investor with their charging structures in order to allow these commissions to be paid," he says. "And guaranteed options are only added to make them seemingly more attractive."

Cox's view is that for the vast majority of people, stocks and share ISAs together with a portfolio of funds where they can use their capital gains tax allowance are far more tax efficient and far less complicated."

I am a trusteee, along with my sister and father, and a solicitor. I'm not wishing to cash it in, and would rather not rock the boat at all to be honest, but I just don't want my daughter to come of age and find that it's all been eaten up by fees and poor performance.