Set up account for grandchildren

Scallypud

I would like to set up an investment for each of my grandchildren.

I was thinking of investing £1,000 into the S&P 500 for 30 yrs.

Can anyone advise the best way to go about this?

dunstonh

I was thinking of investing £1,000 into the S&P 500 for 30 yrs.

Why do you consider that a good idea?

Not the £1,000, as that is very good of you. But selecting a single‑country stock market. And one that is likely nearing the end of its outperformance period and entering a phase of underperformance relative to the rest of the world. No one knows when the cycle switches, but historically it has repeated many times.

Why have you not chosen the more logical option of a global tracker?

Can anyone advise the best way to go about this?

For £1,000, the charge differences will not be significant overall. It is likely a matter of convenience at this time. Almost all pension providers accept minors. Once they reach adulthood, the pension becomes theirs. Typically, while a grandparent can still pay into the pension, they cannot set it up themselves. The account must be set up by a parent or guardian.

Exodi

As above, any reason for the S&P500 in particular?

Oftentimes we see this index cited from new investors as a result of a quick search for the highest performing index, and while the S&P500 has performed very well over the past 10 years, do you therefore believe that the S&P500 will continue to outperform for decades to come?

You've posted this in the pension forum, so I assume you are talking about a Junior SIPP, however it's worth mentioning that JISA's also exist if you wish for the money to be accessible to them at a younger age. Obviously if it was indeed for a Junior SIPP, you would be looking at the money being invested for potentially half a century until they can access it. In either case (SIPP or SSISA), you wouldn't be able to control what it is invested in for 30 years as you suggest, only until they turn 18 at which point they can decide the specific investments themselves.

I'm surprised the S&P500 is still so popular to be honest, particularly amongst those new to investing. Using Vanguard as an example, VWRP is up more than VUAG over the past 12 months (~22% vs ~20%) and is much more diversified (both on number of holdings and geography). Plus I assumed that since VALL launched last month that would be the one-and-done equity fund for most novice investors, but I guess it will be a while before the mainstream audience takes note of it.

Many on this forum are proactively reducing their US allocation.

QrizB

I would like to set up an investment for each of my grandchildren.

Very kind of you! I'm assuming they're still "children"? If they're over-18s most of what follows won't apply.

I was thinking of investing £1,000 …

If your grandchildren already have Junior ISAs, and they haven't already maxxed them out for the year, then adding £1k to each of those would be a way of achieving this.

If they don't already have JISAs, would you be able to persuade their parents to open JISAs on behalf of the grandchildren?

…into the S&P 500 …

As mentioned above, the S&P 500 is an odd choice. Do giver serious consideration to an all-world tracker fund.

… for 30 yrs.

How important is 30 years to you? The grandchildren will get control of their JISAs when they reach 18, which is less than 30 years. Alternatively if you choose Junior SIPPS (and you have posted on the Pensions board) they won't get access until 58, which is quite a lot longer than 30 years.

Scallypud

Thanks to everyone that responded.

I picked S&P 500 because i saw a graph online what £1,000 would of accumulated if invested for 30 yrs.

I will definitely look at the suggestions mentioned above.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82151575#Comment_82151575

Nobody can know how any investment will do for 30 years ( or any period), as nobody can see into the future.

Having said that we all hope that equity markets will continue to grow in the long term, as they always have done.

Note that the global funds suggested are usually around 65% US stocks anyway, but they just give you a bit more diversification in case the UK underperforms.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82151593#Comment_82151593

in case the UK underperforms

Freudian slip there?

Newbie_John

Is it £1000 as a one off or monthly?

Is it in their JISA? If so not sure you'll be able to keep it their for 30 years as when they turn 18 they can withdraw it.

Your ISA etc. you'll have to write well down in a will..

How old are the kids? Under 5? In their 30s :) ?

One off investment is tricky, it could be that S&P is at its height and could drop a lot and be worth £1000 in 30 years (very pessimistic view but possible).

Anothwr alternative could be a 30 year old gilt that guarantees 6% every year till then..

Scallypud

The £1,000 was a one off investment for each grandchild.

In my head i was going to invest it for them so in 30 yrs or so there was a nice wee nest egg for them. I forgot they could just withdraw it when they turn 18.

The only alternative would be to open a JSIPP but would they remember it was there by the time they reach 58

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82151620#Comment_82151620

Yes , I meant the US of course !

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82152198#Comment_82152198

The only alternative would be to open a JSIPP but would they remember it was there by the time they reach 58

Also would they need it by then?

An alternative is to invest the money in your own name, and then you can give it to them when you want/in your will. The downside of this, is that it could use up your ISA allowance and/or end up paying tax on it.