Is a 1.5% charge too much? And is it time to review this...

[Phooey]

My daughters yearly statement has just dropped through the door. Bit of info - she is turning 8yrs old this month and has approx 14k in a HSBC Stakeholder CTF we set up for her using the £250 government voucher. We started it with a Direct Debit of £100/month which we increased to £150 last year and as of today increased it to £200.

2nd page of statement reads -

All shares bought are CTF Accumulation Shares in our UK Growth & Income Fund. These shares are held in your Investment Account. The Authorised Corporate Director (ACD) of the HSBC Child Trust Fund is HSBC Global Asset Management (UK) Limited.

There will be a 1.5% Annual Management Charge (AMC) to cover the cost of running your Child Trust Fund; you will not see this charge shown on your statement as it is reflected in the price of the shares rather than being taken from each individuals investment.


Couple of questions -

Is a 1.5% charge a bit excessive in todays market?

Is it time to take advice on this investment with the possibility of moving funds / provider etc.

Would a JISA be better (assuming we can switch to one)


Obviously it's hard to predict what the money will go towards buying her but I set this up initially with a view to it being a large deposit for her first house. For this reason I don't want the money to land in her bank account when she turns 18!!!

Hoping for some advice as the IFA I use for my ISA and pension says they don't touch JISA's - something to do with too much paperwork for such small amounts?

Thank you

[Ginge R]

It is juicy, yes. Is there enough headroom in your (or your partner's) annual allowance to invest it there instead?

[Phooey]

Ginge R said:

It is juicy, yes. Is there enough headroom in your (or your partner's) annual allowance to invest it there instead?

Cheers Ginge. Currently not - maxing S&S ISA's at the mo. I'd like to keep it in my daughters name, but as the value is starting to increase, and there is potentially at least 10yrs to further increase, I feel I need to review the 1.5% charge.

[davepoth]

One bit of information missing though - how is the fund doing?

[Phooey]

davepoth said:

One bit of information missing though - how is the fund doing?

Good point.

Opened April 2009 with £250 voucher. Contributed £100 monthly from April 2009 to May 2016 when we increased to £150/month. To my calculations that's £9250 in (upto August 2016 statement) and now worth £13700. August 2015 statement was £10800 so this latest year has seen the biggest +

[davepoth]

If you'd put the money in a savings account it would have needed to have an interest rate over 9% to get that kind of return, so it's not doing that badly - 10% on stocks and shares over the long term is a target that gets bandied about.

[Ozzie Osmond]

The whole point of Stakeholder was "low charges". The maximum charge allowed for the first 10 years is 1.5% and thereafter 1%. Be aware that it is of little interest to "advisers" because they can't make any money out of selling Stakeholder to their clients.

You say it was opened in April 2009 so,

• The charges will reduce fairly soon
• Investment return looks fine

https://www.gov.uk/personal-pensions-your-rights/s...

"You pay money to a pension provider (eg an insurance company, bank or building society) who invests it, eg in shares.

These are a type of personal pension but they have to meet some minimum standards set by the government, eg:

• management charges can’t be more than 1.5% of the fund’s value for the first 10 years and 1% after that
• you must be able to start and stop payments when you want or switch providers without being charged
• they have to meet certain security standards, eg have independent trustees and auditors

You can start making payments into a stakeholder pension from £20 per month. You can pay weekly or monthly. If you don’t want to make regular payments you can pay lump sums any time you want."

[Phooey]

davepoth said:

If you'd put the money in a savings account it would have needed to have an interest rate over 9% to get that kind of return, so it's not doing that badly - 10% on stocks and shares over the long term is a target that gets bandied about.

Put like that - I'm happy

Cheers

[Phooey]

Ozzie Osmond said:

The whole point of Stakeholder was "low charges". The maximum charge allowed for the first 10 years is 1.5% and thereafter 1%. Be aware that it is of little interest to "advisers" because they can't make any money out of selling Stakeholder to their clients.

You say it was opened in April 2009 so,

• The charges will reduce fairly soon
• Investment return looks fine

https://www.gov.uk/personal-pensions-your-rights/s...

"You pay money to a pension provider (eg an insurance company, bank or building society) who invests it, eg in shares.

These are a type of personal pension but they have to meet some minimum standards set by the government, eg:

• management charges can’t be more than 1.5% of the fund’s value for the first 10 years and 1% after that
• you must be able to start and stop payments when you want or switch providers without being charged
• they have to meet certain security standards, eg have independent trustees and auditors

You can start making payments into a stakeholder pension from £20 per month. You can pay weekly or monthly. If you don’t want to make regular payments you can pay lump sums any time you want."

Thanks Ozzie. I didn't realise the charge dropped to 1% after 10 yrs!! Is this on a 18yr Child Trust Fund too? I can't see anything in the paperwork to suggest the charge drops in yr 10 onwards. If you guys think the investment is doing ok then that's good enough for me

[swatches]

This fund seems to have consistently underperformed or at beast tracked its sector.

http://www.moneywise.co.uk/fund-information/HSBC-U...

A passive FTSE all share tracker on a different platform could have seen you pay ~0.31% for the same performance.
Even if you wanted to stay invested in the same fund you could get it for 1.17% on a different platform in a JISA.

[sidicks]

swatches said:

This fund seems to have consistently underperformed or at beast tracked its sector.

http://www.moneywise.co.uk/fund-information/HSBC-U...

A passive FTSE all share tracker on a different platform could have seen you pay ~0.31% for the same performance.
Even if you wanted to stay invested in the same fund you could get it for 1.17% on a different platform in a JISA.

Wouldn't there be platform fees on top?

[swatches]

sidicks said:

Wouldn't there be platform fees on top?

I have factored in 0.25% platform fee into those numbers.
So 0.25+0.10=0.35* I originally assumed 0.06% but that fund (Legal & General UK index) is only priced as such on a more expensive platform.
HSBC is 0.25+0.92=1.17.

[sidicks]

swatches said:

I have factored in 0.25% platform fee into those numbers.
So 0.25+0.10=0.35* I originally assumed 0.06% but that fund (Legal & General UK index) is only priced as such on a more expensive platform.
HSBC is 0.25+0.92=1.17.

Ok, thanks.

[Ozzie Osmond]

Yes, with the power of 20:20 hindsight one can always see precisely how things have performed relative to others. The real question is always how an investment will perform in the future and "consistency" can be a useful guide.

I never sell an investment for "average" performance. They have to be significantly underperforming before I get out. Mainly because there's always the risk of jumping out of the frying pan into the fire!

However, I recognise that different people will choose different strategies in this regard. It's very much a matter of doing whatever makes you most comfortable. Me? I'm never comfortable - I see it as a bit like trying to pick your way through a minefield. Even when equipped with a mine detector you still need to be careful!

[Phooey]

swatches said:

This fund seems to have consistently underperformed or at beast tracked its sector.

http://www.moneywise.co.uk/fund-information/HSBC-U...

A passive FTSE all share tracker on a different platform could have seen you pay ~0.31% for the same performance.
Even if you wanted to stay invested in the same fund you could get it for 1.17% on a different platform in a JISA.

Thanks for finding that info. Interesting..