Best investment options

[perihelpneeded]

My DS has his trust fund mature this year, it is around £40k and just looking at options for best places to put this as he has decided he doesnt need access to it yet and would rather leave it longer.

It is currently in an f&c investment trust and has performed well but given that when he turns 18, there will be charges, I just want to see if there are any better options.

Would love any recommendations of investment options to look into.

Bump

My dd had a similar amount, she wasn't in any rush to use it so she just left it in the same stocks and shares account. She's 21 now and it's sitting at about £50k so has grown. Ideally she'd leave it for another 5 years or so and hopefully she could buy a flat outright.

I did suggest possibly keeping it in the same fund as it does perform well, just thought I would see if there are any better options as we will have fees to pay on top soon, but I dont think they are unreasonable amounts.

I would probably leave it where it is. The global markets are all over the place with Trump announcing tariffs and the next day removing them.

If you leave it there for another 30 years your DS could potentially retire early. Compounding returns do something incredible. If he himself once he’s earning continues to add £100 or more per month he’s going to be very well off one day.

On this track, I did wonder if a fund that pays dividends may be a good option, but need to do some more research into the best ones as I was thinking along these lines with compound interest plus those dividends payments, it might be a great idea.

But it is a good fund it is currently in too and we know from history it generally performs well.

What average return has your son received over the last 5 years and how much are the total fees which he would be paying (including the fund charges which i guess the trust fund has been paying up till now)?

You could compare historical performance and current fees with some other options so maybe look at Vanguard, Hargreaves Lansdowne, AJ Bell or similar and funds they offer with a similar risk profile to your son’s fund. If you go to the Morningstar website you should be able to download and compare some different funds and then look at the platforms and what they cost.

I will look at this now. I need to find out exactly what the fees will be to look at this, but will be good to look at some comparisons, thank you for the website suggestion.

What are these charges and the percentage? Why is it he has to pay it when he turns 18?

I need to find out exactly what the charges are. It changes from a child trust fund to a regular investment account and the CTF had lower costs, so I know they will go up, I just need to find out to how much exactly.

What are his goals for the future? If he would like to buy a house it may be worth investing in a Lisa - lifetime ISA. The government will add 25% on all savings up to 4k (so a free 1000) per year. He could siphon off 4k in this tax year and another 4k in April and have 10k to show for it. The only caveat is that savings can only be used on a first house purchase or to draw a pension in later life.

I’ve found Hargreaves to have very high fees and now looking to exit them. It’s ridiculous especially if you trade outside of the U.K.

I would look at interactive investor also and trading212 in particular which has been brilliant if you want very low cost on trading. For funds I don’t know but there may be specific app for that that’s low cost also. You’d need to check and look into it. Funds are not my thing due to, in general, high charges, so I don’t know much about them.

You can transfer a CTF into an adult S&S ISA. I'd leave the F&C IT investment as is and transfer the whole lot into one in specie. Just get the new ISA provider to do it and you'll preserve the tax wrapper.

I use AJ Bell for low charges, but there may be other providers you or he would prefer.

Going forward, if he doesn't need it imminently, leave it all invested in F&C and reinvest the dividends. It's about as good as gets risk-reward wise for long term growth.

Would it be the platform charges increasing, rather than the fees charged by F&C itself?

Fees charged by F&C are typically called ongoing charge or ongoing charges figure (OCF) or total expense ratio (TER) or annual management charge (AMC). They are slightly different depending on what is included in the charge but is basically what the Fund itself charges. I believe these charges are the same whether it is held within a CTF wrapper or an ISA wrapper or outside a tax wrapper.

In contrast, the platform could charge a lower charge for holding the fund within a CTF wrapper rather than an ISA wrapper. This could be what is increasing post-18.

For example, my son holds F&C Investment Trust shares with Columbia Threadneedle. The Fund is F&C but the platform is Columbia Threadneedle. Before he turned 18, it was a CTF. After he turned 18, he converted it to an ISA but still held the F&C with Columbia Threadneedle. Maybe the charges went up (I did not check) but that would be the same whichever fund he held with Columbia Threadneedle so I did not bother to research the increased charge.

Choosing the right platform to hold your investments is something an IFA can advise on. If it is the platform charges which go up rather than F&C's, there is no reason to change the fund because your son will still be stung whichever fund he bought. Might as well leave it with F&C and not incur the transaction costs of switching.

Dividends won’t make any difference. It’s not additional free money, it just means the fund/investment trust is paying out some of its money every year to you. That’s great if you need the income, but pointless if you’re just going to leave it invested.

I would just leave it as as. As PP have said, if your son has the ability to not use the money for another thirty years it might finance a great early retirement for him.

I didn't know the name of it but I meant a fund that reinvest the dividends, I believe it is a drip fund but I am still trying to research. I dont know whats best, I dont have all the options so I am trying to figure that out and thought this may be the place to find people with that knowledge whilst also doing some reading and learning myself.

Yes, sorry, I am not super knowledgeable on this honestly all I know is those costs will change.

His fund has always been in the same place and never looked at moving it because it's always performed well.

I think my only thought was because we have never looked elsewhere, could there be a better option. He doesnt want to use the money right now and potentially it could be left for a significant amount of time so want to make sure I help with the right info for the best options. We did consider speaking to an IFA but honestly didn't know if the amount warranted that.

I do love the idea of knowing he has a chunk of money growing and could potentially be saved for later in life if not needed now, so just want to make sure we have all the options.

I think the general consensus is that the fund is performing well so it's best to leave it. The idea of a LISA is also good but not sure if it's better to take out of the fund for that, or just starting putting little and often away separately instead.

These types of funds are usually referred to as accumulation (Acc) funds. The dividends are automatically reinvested and the fund grows at a higher rate than an income fund (Inc) which will pay out the income which you can either withdraw or reinvest yourself.

Ah fab thank you, I knew someone would have a clue. I feel like trying to figure this all out is so hard because there are so so many options and I dont think im terrible at researching, but there is just so so much to look at.

very grateful for all the suggestions