Matured CTF worth £26,000 – what to do now?

asakusa

My daughter has just turned 18 and now has control of the £26,000 accumulated in her CTF. She has enough money to get through university and has bought a car already. We bought an investment property which we put into a Bare Trust with her brother so they will benefit from the rental income and accumulated savings as well as the value uplift if they decide to sell it.

She doesn’t need the money for anything now and wants to invest it with a plan to look at it again in four years time (or so) when she comes out of university.

We are not knowledgeable about trading platforms or ISA’s JISA’s etc etc. but is it even possible to invest it in a fund or similar that doesn’t have excessive fees? The fees on my discretionary portfolio with my stockbroker are 2% which is way too high for this size of investment isn’t it?

So my question is, what is the best way to invest this lump sum?

All suggestions very welcome. Thank you.

 

xylophone

We bought an investment property which we put into a Bare Trust with her brother so they will benefit from the rental income and accumulated savings as well as the value uplift if they decide to sell it.

You mean that you and your husband bought a property in Bare Trust for your (then) unmarried minor children?

This meant that they were the beneficial owners of the property while you and your spouse were the Trustees?

You did check the tax rules relating to income arising on this gift  into Trust?

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4300

My daughter has just turned 18 and now has control of the £26,000 accumulated in her CTF. 

How and where is it being held pro tem?

What were the options offered by the provider?

asakusa

Yes to your first question.

The money is with the CTF provider and no options were given.

masonic

If she's now 18, then she's also eligible for an adult S&S ISA with a £20k allowance. If going with low cost options, then total fees below 0.5% are quite feasible. Four years is a bit short on the investing timescale, but if it is a case of maintaining a previously invested sum, then it may just need a bit of derisking if she may need the money at that point in time.

asakusa

Thanks masonic, I mentioned four years because that is when uni finishes and she'll probably be able to engage in it more. I see this as the trigger for her planning and investing for the future.
Can you suggest/recommend where 0.5% fees are available? I presume you're talking about the platform fee?
Thank you.  

masonic

I was suggesting 0.5% for a combined platform and fund fee. Some cheap options include:

• Vanguard Investor, if you are ok with just Vanguard funds: Platform fee 0.15%
• iWeb: One off £100 opening fee, then no platform fee, £5 trading fee
• Halifax Sharedealing: Flat £36 per year platform fee, £9.50 trading fee (reduced to £2 for scheduled monthly investing)

Fund fees needn't be more than about 0.25%

asakusa

Thank you masonic.
So these are platforms where I chose my own stocks, shares or funds?
I guess this is the million dollar question that I need suggestions for. What funds to invest in that are medium to low risk? There are thousands, so who would give me advice/suggestions on that without trying to 'sell' me for their 1% fee like IFAs do? 

Albermarle

We can not give advice as such, but in similar circumstances some options like the following are often suggested.

For a young person with a long time frame ( over 7 years, preferably over 10 ) then a global tracker is often used. These are 100% equity, and just track the movements of global stock markets, so will bounce around quite a lot, but should show good growth in the long run ( not guaranteed of course) Typical charge 0.1% to 0.2% 

For a shorter time frame / less risk appetite, then  low cost multi asset funds are popular. These are a simple mix of equity and bonds in various ratios, say 60/40 or 40/60 for example. HSBC global strategy funds and Vanguard Life Strategy funds both have a charge of around 0.2% ( + platform fee) 

Both options are known as passive investing as the funds are not actively managed, which keeps costs down.

Low risk funds are usually best avoided at this stage in life. Trying to avoid risk can just bring poor growth, so is a risk in itself. You may be better to just put it in a safe savings account if you want no risk.

cloud_dog

asakusa said:

Thank you masonic.
So these are platforms where I chose my own stocks, shares or funds?
I guess this is the million dollar question that I need suggestions for. What funds to invest in that are medium to low risk? There are thousands, so who would give me advice/suggestions on that without trying to 'sell' me for their 1% fee like IFAs do? 

There are a number of good sources to help you on this aspect.

I think Lars Kroijer (book, website, Youtube channel) is worth looking in to.  In addition there are sites like Monevator which may help.
https://monevator.com/

Albermarle

Just to go back to the Original Post.

 The fees on my discretionary portfolio with my stockbroker are 2% which is way too high for this size of investment isn’t it?

I think it would be fair to say that the view of this forum is that 2% is too high to pay for any investment.
Even with  financial advisor charges, you should be aiming for 1.5% in total maximum, and preferably a bit less, especially if the fund is quite large.

xylophone

https://monevator.com/low-cost-index-trackers/
may be of assistance.

https://www.youinvest.co.uk/transfer-matured-child-trust-fund-isa may be of interest.


 Or perhaps she could simply switch to an easy access cash ISA pro tem and then consider her options?

https://www.thisismoney.co.uk/money/saving/article-11212479/Santander-cash-Isas-lead-market-1-85-easy-access-3-one-year-fix.html