What would you do?

ValiantSon

lolamancity wrote: »

Thanks Alex. Think I'll definitely go for the 2x JISA with Vanguard then. I'm swaying towards the 80/20 option, or is this too risky? 1 child is 9 with £5.1k in a cash ISA, the other is 4 with £2k so quite a while before they turn 18, at which point I'll have very heavy influence on making them turn it into something else similar.

Over the timeframes you're talking about I don't think 80/20 is too risky, and especially if you can persuade them to keep the money invested in an S&S ISA at 18. 60/40 would probably be quite conservative if the money is likely to remain invested for at least another 5-10 years.

lolamancity wrote: »

Also think the S&S LISA seems to be a good idea too. Partner is contributing enough to max the employer contributions and we are very aware of the 40% tax and. Child benefit implications and have already decided that we'll just bump his pension contributions if that starts becoming an issue. He earns between £41-43k but he's at a point where his next step soon would be advanced roles with more money so it is in our thoughts.

Sounds very sensible.

lolamancity wrote: »

I've also always kept my eye on my state pension forecast, no gaps in that as yet.

Good to keep on top of it. State pension may not be enormous, but it is definitely worth the cost.

lolamancity wrote: »

Thanks so so much Valiantson, you are absolutely amazing!

I'm decided on the kids JISA's with Vanguard Lifestrategy although as I mentioned above, slightly torn about which option.... Would you say the 80/20 for JISA would be a good bet?

I'd never hide the money from them or even take it (i can't even bring myself to borrow a quid out of their piggy banks in emergencies!) Son 1 is super sensible and also mega intelligent so has got mega potential if he makes the right choices, and son 2 is unlikely to ever manage his own finances without at least a bit of assistance (and his money will likely be going towards him living independantly), but i would want to sit down and have a really good chat with them about it and make it clear what the money was/is intended for, so would prefer a pinky finger grip on it even when it is signed over to them fully!

Glad to help.

I wasn't suggesting that you would want to touch the money in the JISAs, and I hope you don't think that I was. I just wanted to explain how they worked. It sounds like both of you have good financial sense, so you stand a better than fair chance of helping your children to develop it too.

As above, 80/20 seems a sensible investment choice. Some people may well advocate 100% equities and you'd have to make your own decisions about this, but for my money 80% is still adventurous, while having a little bit of restraint to reduce the risk.

Alex's suggestion of the Target Retirement funds is worth considering too (don't worry about the name, they don't have to be used for retirement), although my personal choice would be LifeStrategy, but you may favour what you see with Target Retirement.

lolamancity wrote: »

Life assurance we've toyed with, but partner gets an occupational one (only death or injury in work I think) and my parents aren't shot of cash & would help out in immediate emergencies, not ideal but we keep putting it off (I know, I know!) He's also nominated me to get his pension so we're covered in that respect at least & is paying the most to get the max employer contributions.

The life assurance through work is probably fine, although I'd just double check the terms to be sure.

lolamancity wrote: »

I'm definitely going to open a S&S LISA for a pension then. I can't afford to pay large amounts into it because it's too risky to lock it away but I'm definitely going to get it rolling anyway. I'm thinking maybe the Nutmeg LISA, mainly because I'm still a total novice, and for now, a robo investor seems a safe bet. I can always change it to something I can have more of an input with in years to come?

Seems a sensible choice. As I say, you can continue to learn about other investment strategies, e.g. multi-asset funds, and the children's investments in the JISA will give you more of an idea about them as you go.

lolamancity wrote: »

And finally.... In terms of my large amount of rainy day/emergency funds and due inheritance... I'm going to open a S&S ISA with a robo investor for at least a few years so i can learn along the way. I think I decided on Moneyfarm over Nutmeg and Wealthify because I read a few lengthy expert comparisons and also a fair few pages of user reviews and people seemed to be mentioning more success with Moneyfarm.

I haven't used any of them (I invest in OEICS - like the Vanguard funds) so wouldn't like to comment specifically on them, but if you feel more cofortable with Moneyfarm then go with that option. Both Nutmeg and Moneyfarm diversify your investments, so both the LISA and the ISA portfolios will be invested across a range of asset classes and geographies, which is what you would want to be happening. While the fees are higher than the other options I suggested, the diference in monetary terms is not enormous while you are still dealing with relatively small sums invested, and if that extra cost makes you feel more comfortable about it then it is worth paying.

lolamancity wrote: »

One thing I'm still a bit confused about though.... Is Vanguard Lifestrategy a robo investment? From what you've posted, they obv have much lower fees, but do they operate in the same way as Moneyfarm? I've tried a load more reading into it but I still can't work it out!

No, it isn't a robo, but in many regards it might seem like that. Vanguard LifeStrategy is a multi-aset passive tracker. What this means is that your investments are split across a wide range of different assets and globally, so you aren't taking too much risk with a narrowly focused investment. The investment simply tracks what is happening in the various stock markets by buying and selling assets according to how those markets are moving. They do this by tracking various indexes. This is different from an active fund where a fund manager is making decisions about hat to invest in on a daily basis.

I'm about to open up a whole can of worms here (and there is an ongoing debate about which is better), but passive funds should return the market return, whereas an active fund tries to beat the market and return more. You would pay more for an active fund and there is no guarantee that it would beat the market, and, even if it did, for a year or two or three, it probably wouldn't consistently. A lot of research has shown that, in general, after factoring in the fees, most active funds don't beat the market and investors would have been better off using a tracker.

Using a global multi-asset tracker (like Vanguard LifeStrategy) will probably deliver the best returns in your situation. (I'm getting my tin helmet ready now for fans of active funds to wade in. For what it's worth, I favour passive investment, although I do have one active fund, albeit with a relatively small amount invested - I'm trying it out as a side project).

lolamancity wrote: »

Which would you go with purely for the 'robo' investment?

Really hard to say. Nutmeg is the lower cost option and that has something to recommend it, but Moneyfarm are offering you a decent boost to begin with and may well deliver reasonable returns. Perhaps the best thing to do is what you suggested and open the LISA with Nutmeg and the ISA with Moneyfarm and then start to compare (but keep in mind that returns are not consistent and over a short period of time comparisons are not worth bothering with, so you'd need to give it a year or two at least). If you decide that Nutmeg is okay then you can always transfer the ISA to them at a later date.

If you had to push me then I would go for Nutmeg for both the LISA and the ISA, but it does have to be your choice. I'm just not convinced that Moneyfarm are doing anything special for the extra fees. Of course, you wouldn't get cashback doing that, so maybe go for Moneyfarm for at least the first three months and then consider a switch to Nutmeg after that. Just a word of caution: I wouldn't switch if I was going to lose out on the investment, i.e. if they happened to be down at that moment. In that instance I'd wait until the value had recovered and then make the switch.

lolamancity wrote: »

Ive got a top cashback account so I'm even more swayed towards Moneyfarm now!

Yeah, it is a good offer. Just double check it because oddly, when I first checked, I was signed in to my Topcashback account and when I checked again, I wasn't, and they were actually offering more cashback when I wasn't signed into my account! (£121.20 or £202 signed in, compared to £126 or £210 when signed out).

lolamancity wrote: »

I can't tell you how helpful you've been so far, I appreciate it immensely! My finances have been a cloud over my head for years now!

Glad to be of any help I can.

TARDIS

You might want to give some consideration to the potential impact of savings on means tested benefits for your youngest son in the future. Also, if you're anticipating he won't have the capability to manage his own money in the future then you may not want the potential hassle of him having a lump sum aged 18 in his name as the legalities of who is entitled to help an adult without capacity to manage their money can get really complex. Might be simpler to keep in your name but in an account you know is meant for him perhaps?
I'd also give more thought to marriage - not just for the tax benefits but to protect yourself. You really are in a vulnerable position if your relationship were to break down in the future - obviously hopefully this will never happen, but best to plan for all eventualities.

LHW99

Another thought, however, is life assurance.

One thing that may be worth looking at here is family income benefit policies.
They work by paying a specific annual income (say £10k) over a specified time frame (say the next 15 years). Because the amount the insurer has to pay out goes down over the termof the policy (potentially 15 x £10k in year one, but only 1 x £10k towards the end) they can be quite cheap. It would ensure some extra income if the worst happened, at least until son 1 is (relatively) independent.

lolamancity

Again, i'm so grateful for all your in depth replies! Wish i could buy you all a drink!

Alex...will look into your suggestions, i haven't really looked beyond the basic first pages on the Vanguard website yet so will spend the weekend doing just that.

BLB - thanks for that Insightful article

ValiantSon - amazing again, thankyou for being so honest (i didn't think you were implying i'd use the kids money btw!)

You've made me think twice about Moneyfarm now (rightly!) If i think about it, something doesn't feel right about them offering cashback en-masse for some reason. I'm sure i read somewhere (and Alex mentioned) these small firms are operating at a loss, so offering cashback seems a bit unnerving re: being secure. Might do a bit more thinking about who specifically to open the S&S ISA with now.

One (hopefully!) last thing... in terms of the JISA/LISA/ISA, is there any implications of paying monthly into each of them (maybe fees per deposit)?

A_T

Your son is 4 - soon he will be entitled to a full-time education just like any other child. This will give you time during the day to have a job again.

Alexland

ValiantSon wrote: »

Alex's suggestion of the Target Retirement funds is worth considering too (don't worry about the name, they don't have to be used for retirement), although my personal choice would be LifeStrategy, but you may favour what you see with Target Retirement.

For a 9 year old who might want to withdraw at 18 that's only a 9 year investment timeframe so there should be a risk reduction strategy. One option would be to use a mix of two VLS funds in varying proportions with regular rebalancing and reduction in equity ratio. Or just use VTR funds and pay the extra 0.02%. Even if you want to be more adventurous you could always pick a VTR with +5 years on it to get more equities.

ValiantSon wrote: »

Perhaps the best thing to do is what you suggested and open the LISA with Nutmeg and the ISA with Moneyfarm and then start to compare (but keep in mind that returns are not consistent and over a short period of time comparisons are not worth bothering with, so you'd need to give it a year or two at least). If you decide that Nutmeg is okay then you can always transfer the ISA to them at a later date.

If you had to push me then I would go for Nutmeg for both the LISA and the ISA, but it does have to be your choice. I'm just not convinced that Moneyfarm are doing anything special for the extra fees. Of course, you wouldn't get cashback doing that, so maybe go for Moneyfarm for at least the first three months and then consider a switch to Nutmeg after that. Just a word of caution: I wouldn't switch if I was going to lose out on the investment, i.e. if they happened to be down at that moment. In that instance I'd wait until the value had recovered and then make the switch.

Sure if you've got the time pickup the Moneyfarm bonus then switch the ISA elsewhere. We did it with general investment accounts so just withdrew the money after 3-4 months. I don't rate Nutmeg for ISAs as Vanguard would be lower cost and a similar investment. Nutmeg or HL are better for the LISA which is a less competitive market.

ValiantSon wrote: »

Yeah, it is a good offer. Just double check it because oddly, when I first checked, I was signed in to my Topcashback account and when I checked again, I wasn't, and they were actually offering more cashback when I wasn't signed into my account! (£121.20 or £202 signed in, compared to £126 or £210 when signed out).

That's because it shows the Plus membership level cashback and you are a Classic member. Plus costs £5 per year.

lolamancity

Tardis - thanks it's a bit too early to tell, but we think he will be ok, he's just going to need lots of guidance and checking rather than complete management. Re: marriage. Urgh it's just an underlying bone of contention - he wants to get married, i don't (i've been married before!) so we just don't talk about it. We obviously want and expect to be together forever but I feel if we got married purely for financial purposes, it'd cause more trouble than it's worth. But i totally understand why it's the sensible thing to do! Kind of pinning my hopes on the government changing the rules at some point, but i doubt it!

LHW99 - never heard of that so it's on the list to look into. I've just asked him what cover he has and he said he thinks it's only something based on dying on the job (!) so thats obviously not adequate enough for our family.

Alexland

lolamancity wrote: »

One (hopefully!) last thing... in terms of the JISA/LISA/ISA, is there any implications of paying monthly into each of them (maybe fees per deposit)?

No trade fees with Nutmeg, Moneyfarm, Vanguard (unless you do live ETF trades) or HL (for funds) so provided you meet their minimum regular contribution levels you will be ok.

Of those Vanguard (for the ISA and/or JISA?) and HL (for the LISA?) are most financially secure but you still get up to £50k protection under the Financial Services Compensation Scheme. Obviously they won't protect against normal investment losses.

If he wants to get married then it sounds very advantageous for your position.

ValiantSon

lolamancity wrote: »

You've made me think twice about Moneyfarm now (rightly!) If i think about it, something doesn't feel right about them offering cashback en-masse for some reason. I'm sure i read somewhere (and Alex mentioned) these small firms are operating at a loss, so offering cashback seems a bit unnerving re: being secure. Might do a bit more thinking about who specifically to open the S&S ISA with now.

Yes, they are operating at a loss, although that is quite normal when businesses are in their early years. Nonetheless I can understand your caution. One thing to note is that your investments are held separately from the companies money, so if they should fail your investments would be safe, although it might take a little time to get access to them again.

The cashback incentives are obviously there to encourage new customers with the hope of growing the business to profitability. It isn't necessarily anything to get too worried about, but there is always a risk that they will go under and you will have some inconvenience in getting things sorted.

lolamancity wrote: »

One (hopefully!) last thing... in terms of the JISA/LISA/ISA, is there any implications of paying monthly into each of them (maybe fees per deposit)?

That depends on the provider. Some will charge you to invest the money, rather than simply to pay money in. It is a two-step process: you pay money into your account and it is then invested. With many platforms this can be done in one move by nominating that a payment is to be invested in a particular way. Of the platforms that I have already mentioned, only AJ Bell charge for investing (and selling investments) in funds like Vanguard. They charge £1.50 each time, so a monthly investment will cost you £18 per year. For me, I think the option with Hargreaves Lansdown, investing in Blackrock Consensus is the better option than, say AJ Bell investing in Vanguard or HSBC, given the trading costs on AJ Bell.

A good comparison table for the different fees can be found here: http://monevator.com/compare-uk-cheapest-online-brokers/

ValiantSon

Alexland wrote: »

For a 9 year old who might want to withdraw at 18 that's only a 9 year investment timeframe so there should be a risk reduction strategy. One option would be to use a mix of two VLS funds in varying proportions with regular rebalancing and reduction in equity ratio. Or just use VTR funds and pay the extra 0.02%. Even if you want to be more adventurous you could always pick a VTR with +5 years on it to get more equities.

Fair enough. Either option is good.

Alexland wrote: »

Sure if you've got the time pickup the Moneyfarm bonus then switch the ISA elsewhere. We did it with general investment accounts so just withdrew the money after 3-4 months. I don't rate Nutmeg for ISAs as Vanguard would be lower cost and a similar investment. Nutmeg or HL are better for the LISA which is a less competitive market.

I'd agree completely about Vanguard being the better ISA option, but I was offering my view out of the robo options as that seems to be where the OP was currently interested. If it was an option to include funds as well then I'd open the Moneyfarm ISA for the bonus and then switch to Vanguard.

Alexland wrote: »

That's because it shows the Plus membership level cashback and you are a Classic member. Plus costs £5 per year.

Interesting. I know about "Plus Membership" and have completely ignored it as it wouldn't deliver for me, but I hadn't realised that they were showing that as the default cashback without being logged in. That's rather sneaky of them!