S&S ISA for a New Born

Cptralls

Hi All,
I have been weighing up what to do with a small pot of money my newborn child has acquired and I think from some recommendations on this forum that the best option is to setup a S&S ISA. I have some queries on this?

1. Is this a sensible option considering it will be over an 18-year tenure? I don't really see the benefit of a saving's account paying circa 3%
2. Vanguard is the platform I am thinking of using, is this suitable?
3. I have never dealt with S&S's before, would this need regular management?
4. Do I need to pay in a fixed amount each month?

Thanks in advance.

AnotherJoe

1. More than sensible . I'd say it would  be almost negligent to hold it in savings accounts.

2. Its OK. You are restricted to vanguard funds. Just please dont use a VLS one. Just choose a global one without any extra UK weighting. For example VWRL. Go for 100% equity over 18 years nothing else makes sense eg forget about bonds.

3. Nope. Buy and forget. Top up if later sums of money come along.

4. Depends on the company but most likely not

How much money is involved ?

And Congratulations  !

Alexland

Cash Junior ISAs have attractive interest rates circa 3% if you shop around so you may question if it's really worth suffering investment volatility when Vanguard's own 10 year projected average stock market return at the start of this year (before the virus became widespread and markets crashed then recovered despite the ongoing global economic pain) was only 4% pa before fees anyway. So to outperform cash your child would probably need to take a lot of risk and keep fees ultra low.
Still if you go with a S&S JISA then Vanguard are fairly cheap at 0.15% (although they require a minimum initial £500 lump sum or ongoing commitment of £100 per month until you reach the £500) however if you can wait until 1st September then Fidelity have told us they are launching a zero fee Junior ISA account although have not published full details yet. Fidelity would also offer a wider choice of funds such as the HSBC FTSE All World tracker which is almost half the price of VWRL mentioned above with both tracking the same index.
Also consider your derisking strategy in the 5-8 years leading up to withdrawal (eg if the money would be used from age 18 for university) as you wouldn't want to be selling while markets are low. Usually this would involve introducing an increasing quantity of bonds but with their projected return around 1% pa it might be better to just transfer the whole lot to a Cash account if the rates are still attractive.
Alex

poppy10_2

AnotherJoe said:. Just choose a global one without any extra UK weighting. For example VWRL.

For a "set and forget" investment for 18 years I'd suggest the Vanguard Global All-cap fund rather than VWRL. It is accumulating whereas VWRL pays out dividends which you would then have to manually reinvest - Vanguard's doesn't currently have an option to automatically reinvest dividends, and other platforms would charge you a transaction fee each time.
Agree with all the other points.

xylophone

A JISA can have both a stocks and shares component and a cash component - no reason why a child should not have both?

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

cloud_dog

Still if you go with a S&S JISA then Vanguard are fairly cheap at 0.15% (although they require a minimum initial £500 lump sum or ongoing commitment of £100 per month until you reach the £500) however if you can wait until 1st September then Fidelity have told us they are launching a zero fee Junior ISA account although have not published full details yet. Fidelity would also offer a wider choice of funds such as the HSBC FTSE All World tracker which is almost half the price of VWRL mentioned above with both tracking the same index.

This is the Fidelity document/letter update we received, second bullet being the relevant item:

adam06_2

I'm planning on getting a vangard global accumulation account with junior isa when mine is born in a few months. I have a vangard account for myself, really easy. Just set it up pay the initial minimum payment a
(£500) and then I'm going to put
£20 a month direct debit. And just leave it. And forget. (max allowed is £9k per year) . Don't worry about the ups and downs you are in it for the long term.

cloud_dog

Why not go with Fidelity and save yourself the 0.15% platform fee each year?  And, you can still invest in a Vanguard fund if you feel so inclined.

Vanguard have a minimum contribution of £100pm, according to their website? 

Alexland

cloud_dog said:

Vanguard have a minimum contribution of £100pm, according to their website? 

A while ago another forum poster confirmed (please don't ask me to find the post) that they could do a regular contribution under £100 per month on Vanguard once the account is open so the £100 is just an initial obligation if you don't have the £500 initial lump sum. Unsure if they would even bother to stop you reducing it before the first payment but to play fair it should probably run until the account has had at least £500 in contributions. Still I agree it's worth holding back a few weeks to see the full details of the Fidelity offer.

cloud_dog

Yeah, I have heard that in places, also.

Herbalus

I can confirm that. Started JISA with a £1k gift from grandparents and I then set up an £84.20 DD to top up monthly. (Amount of child benefit for anybody wondering why an odd amount).

I’ve now stopped that as prefer to top up manually using a Halifax debit card, but that’s for a reason most will know about and isn’t relevant to whether a direct debit smaller than £100 works.