MSE News: Junior Isas: should parents choose cash or shares?
Options
Comments
-
That's part of why the protection of the JISA may be useful for them, for it will protect their child's money from sadly routine life problems that the parents may have.Pinner_Ram wrote: »More assumptions, and this cohort you describe will be unlikely to be able to use their own allowances never mind fund a junior isa!
We can know that almost all of those eligible for a JISA will be less than one year old because only a few older than that can be eligible for having one. And we also know that most parents will be relatively young and that there's something greater than a 50% chance that a parent of a new child will be not only a new parent but a first time parent because the replacement rate for population in the UK is less than 100%. So the majority of those eligible for JISAs are likely to be the children of relatively young and relatively new parents who are more likely than the population as a whole to experience unemployment, because of the way unemployment varies with age.
In terms of total amount invested I agree with your apparent view that most JISA payments by value will be made by wealthier parents who will have lower risk of unemployment and other financial unpleasantness. For myself I might well go with the approach that you suggested, but it's less likely to be the right one for most of those eligible for a JISA.0 -
"That's part of why the protection of the JISA may be useful for them, for it will protect their child's money from sadly routine life problems that the parents may have"
Spot on, I have a junior isa for LO, we were fortunate enough to be given money by relatives when she was born and on her 1st birthday and I have paid this into a junior isa - come what may with our own finances, this is for LO's future and won't be touched by us, I also plan to add to it at regular intervals.
Specifically I went for the H&L junior isa investing in the HSBC All share tracker fund, any thoughts on that?Snootchie Bootchies!0 -
Fund choice is good but not on the HL platform as you'll be paying £2 per month fees. You might find it more cost effective to use a BlackRock tracker as that doesn't incur the platform charge.
I've just moved all my trackers from HL to Cavendish as the plaform charges would be costing over £200 per year with HL.Remember the saying: if it looks too good to be true it almost certainly is.0 -
I generally dislike a very high concentration in UK investments so I'd prefer to look at a global fund with some UK exposure.
For those who will not look at the investments and adjust once a year or so actively managed funds are unsuitable so index trackers are the way to go, else actively managed funds can be better.
Index Trackers
For the UK which tracker is best depends on how much money is invested. The BlackRock UK Equity tracker has a TER of 0.57% and no platform fee so it can be cheaper than the HSBC FTSE All Share tracker at 0.27% TER with £24 a year platform fee. Here's what the platform fee adds to the TER for various amounts invested:
1,000: 2.4% total 2.67% BlackRock cheaper
2,000: 1.2% total 1.47% BlackRock cheaper
3,000: 0.6% total 0.87% BlackRock cheaper
4,000: 0.3% total 0.57% break even amount
5,000: 0.15% total 0.42% HSBC cheaper
Since the annual limit is £3,600 it's likely that the BlackRock fund would currently be cheaper then the HSBC one.
The Vanguard FTSE UK Equity Index fund has a TER of 0.25% also with a £24 platform fee. But it has an initial charge of 0.5% and it takes a long time for just the 0.02% difference in TER to recover that so the HSBC fund is a better choice if performance matches.
That might be paired with Legal & General International Index Trust which covers the world except the UK (tracks FTSE World ex UK index). 0.9% TER and £12 platform fee so the L&G Global 100 Index might be preferred at 1.15% TER and no platform charge, though it's performed less well.
For someone with a high tolerance for lots of ups and downs the BlackRock Emerging Markets tracker at 0.6% TER with no platform fee might be interesting. Given the 18 year time horizon for most children this is a fairly decent thing to be doing for the first few years, gradually becoming more cautious over time.
Actively managed
Something like the Jupiter Merlin Worldwide Portfolio for someone who doesn't want to be watching things a lot, perhaps checking once a year in case managers change. That does sector allocation and balancing that someone who won't spend much time looking won't do. This one covers UK as well as global developed and global emerging markets so it's a nice one stop shop for those who like active management.
For just the UK the Invesco Perpetual Income fund is very popular.
For someone with a high tolerance for lots of ups and downs Aberdeen Emerging Markets might be an interesting fund choice. There is no initial charge in spite of the description, I asked.0 -
-
Sorry, found out the answer to the question so I'll save your time in answering me.
Thanks.0 -
Pinner_Ram wrote: »Just remember that when your little darling turns 18 she'll be legally able to splash it all on a week in Ibiza with her mates or the latest iPad!
PR
Which is exactly why I have decided not to open a Junior ISA. I have a 10 month baby and would hope at 18 years they would be sensible enough with a large pot of money. Then I remember what I was like at 18 and would probably of blown most of it on useless stuff I didn't need. So we'll be using one of our ISA allowances to save for our child to ensure we have complete control.0 -
monoposto, I have the same concern - but wouldn't you consider putting a small amount away in a JISA anyway, to see if the child can be responsible?
By my calculations, if you can put £10 away every month and maintain a 6% pa rate, it would amount to over £3500 by the 18th birthday. What that might be worth in todays money, of course, is anyones guess
0 -
Why a Jnr ISA? To use child's CGT allowance needs assets held by that child of £150k before ISA starts to shelter gains. If donor is not a parent - it takes £300k of gift to use childs IT allowance. If a parental gift it will save you £30 of ITax for each year you use the allowance (assuming you are higher rate tax payer - admittedly this will multiply and compound) - saving £10 after wrapper costs. Beware politicians bearing gifts! BTW Jamesd has a point Martin: crude descriptions of equity risk don't help - equity prices are volatile but for a long term diversified investor the risks lie with other asset classes like cash and bonds. MK1427 Like the idea of an ISA as a test of prudence. As bankrupcy protection? - try buying a sleeping bag. (resend - last one I think disappeared into the ether)0
-
Why a Jnr ISA? To use child's CGT allowance needs assets held by that child of £150k before ISA starts to shelter gains. If donor is not a parent - it takes £300k of gift to use childs IT allowance. If a parental gift it will save you £30 of ITax for each year you use the allowance (assuming you are higher rate tax payer - admittedly this will multiply and compound) - saving £10 after wrapper costs.
Can you explain your calculations?
I really don't understand why you need £150,000 before CGT becomes an issue. By my calcs you would have a CGT liability at £11k if you'd bought an asset that had increased from £100.Remember the saying: if it looks too good to be true it almost certainly is.0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards