Child Bonds savings

Joannacja

Hello, we want to set up a Child Bond savings plan for our niece, around £10 a month until she reaches 21, when we will give her the savings.  Scottish Friendly’s Child Bond plan ticked these boxes, but with 18% dissatisfied customers (admittedly the first 1 star review concerned delay in pension cash) should we be concerned?
Is there anything better out there please?  

dunstonh

Scottish Friendly’s Child Bond plan ticked these boxes, but with 18% dissatisfied customers (admittedly the first 1 star review concerned delay in pension cash) should we be concerned?

Ignore reviews on financial products as they are more often than not written by people moaning about something the product was never meant to do or don't understand it.  Things like expecting money in the bank the next day despite it being an investment product that needs the assets to be sold and wait for settlement.  Or thinking a pension is a savings account etc.

That said, these regular savings plans are typically very expensive and the method is largely obsolete.   The reduction in yield, taken from the key features document is 4.2% p.a.  i.e. the effect of charges will reduce the annual return by 4.2%p.a  And that isn't including the cost of life cover.



a RIY of 4.2% is staggering.  A 2001 stakeholder pension had RIY of 1.1%.  Modern investments on a non-advised basis are around 0.50% p.a.     One reason is that £10pm is a tiny amount and commercially, loss-making at 0.5-1.0%.     So, unless they charge a lot, it wont be profitable.   Some will run loss leaders but when the plan only has a premium range of £10-£25pm, then they are not going to get much cross subsidy from larger amounts.

With a RIY of 4.2%, it is far too expensive for me personally. 

Joannacja

Many thanks for this - very useful. Is there anything similar you could please recommend? 

xylophone

Does the child have a JISA? You could contribute to this - she will be able to access the funds at age 18.