Investment gurus - are unit trusts good for kids money?
Discussion
We have about £20k-£30k of our kids money to invest for the next 10yrs or so. Before I engage an IFA, I thought I'd get some impartial advice from the PH forum. Looking for capital growth (rather than income) and don't mind whether or not hte money is in a 'trust' for the kids or not - as long as it performs better than the 4% it gets in the various kids accounts & bonds that it currently resides in.
Cheers
Cheers
IMO, Unit Trusts (and OEICs and UCITs) are perfect for this kind of thing. Offshore funds may also be an option, depending on your circumstances and plans for the future.
SJP have some good fund managers, no reason not to use their funds but there are plenty of fish in the sea.
I would recommend you get advice on how to minimise the tax aspect of this as Income tax and CGT can eat substantially into your gains. Talk to an accountant about this, if the IFA doesn't sound knowledgeable.
SJP have some good fund managers, no reason not to use their funds but there are plenty of fish in the sea.
I would recommend you get advice on how to minimise the tax aspect of this as Income tax and CGT can eat substantially into your gains. Talk to an accountant about this, if the IFA doesn't sound knowledgeable.
The key is not fund selection but on regular reviews. Of the top 100 funds in 2001, only one is now in the top 100 today! I would always go for a fund supermarket like Skandia - the charges are then a lot lower for switching between funds.
Do you want the kids to have access to the cash - you could always set up pension funds (too many people being close-minded about these at the mo) for them and see tax gains immediately? This would also allow you to invest in the same unit trusts that you would have outside of the pension plan.
Do you want the kids to have access to the cash - you could always set up pension funds (too many people being close-minded about these at the mo) for them and see tax gains immediately? This would also allow you to invest in the same unit trusts that you would have outside of the pension plan.
If its in your name you will pay tax at your highest marginal rate on gains/dividends if applicable. If you do at least split it with your wife, that way you can utilise 2 CGT allowances in future.
Most providers wont allow under 18's to effect UT's, so trusts might be the way to go. However you can effect it in your name and assign to a minor. That has some benefits.
UT's are fine, offer good fund choice and if you use a fund supermarket you might get a good few free funds switches per year, or at least lower cost than encashing and reinvesting somewhere else.
There are a fair few investment bonds with external fund links into UT funds, and these have maybe more long term tax benefits.
When looking at funds look at the Reduction in Yield figures. This will give you an idea about the real effect of charges. If it reduces from 6% to below 4, maybe 3.5% you have to have a long look at what you are actually getting.
I think with the level of funds you have you could certainly get a spread portfolio offering asset and geographical balance, therefore ensuring you dont suffer from 1 index.
4% should be more than easily affordable over the long term. In fact 6-9% would be more likely after charges for even a cautious risk given the current market. But thats not guaranteed now is it!
Pensions are good, but beware that they will have to leave it there until at least 55 years of age, and will only be able to take 25% as tax free cash and the rest as annuity income. Quite restrictive i think you'll agree for kids, but the tax benefits are decent.
Most providers wont allow under 18's to effect UT's, so trusts might be the way to go. However you can effect it in your name and assign to a minor. That has some benefits.
UT's are fine, offer good fund choice and if you use a fund supermarket you might get a good few free funds switches per year, or at least lower cost than encashing and reinvesting somewhere else.
There are a fair few investment bonds with external fund links into UT funds, and these have maybe more long term tax benefits.
When looking at funds look at the Reduction in Yield figures. This will give you an idea about the real effect of charges. If it reduces from 6% to below 4, maybe 3.5% you have to have a long look at what you are actually getting.
I think with the level of funds you have you could certainly get a spread portfolio offering asset and geographical balance, therefore ensuring you dont suffer from 1 index.
4% should be more than easily affordable over the long term. In fact 6-9% would be more likely after charges for even a cautious risk given the current market. But thats not guaranteed now is it!
Pensions are good, but beware that they will have to leave it there until at least 55 years of age, and will only be able to take 25% as tax free cash and the rest as annuity income. Quite restrictive i think you'll agree for kids, but the tax benefits are decent.
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