Who would be the best and cheapest platforms for JSIPP and JISA?
30 March 2021
Question by JPH
Hi I have 2 children and they have £6,000 each sitting in a savings account paying pretty much nothing. I am thinking of putting something into a JSIPP and balance into an JISA, who would be the best and perhaps cheapest platforms? I don’t want to go down Vanguard route but I hear Fidelity might be a good option. Welcome any thoughts please?
Answered by Tim Blowers
As is the case with most banks, the interest rates are currently low (or nothing) which is linked to the Bank of England base rates. A diversified investment portfolio, which includes equities, will generally provide a higher return over the long term than cash. This is important when thinking about inflation and if that will mean your (or your children’s) money will do less in future in terms of purchasing power.
A SIPP or pension offers the great benefit of potentially receiving tax relief, even if you don’t pay tax. A parent could make a contribution on the behalf of their child to a pension, who isn’t earning and receive basic rate tax relief. They could pay in up to £2,880 and have £720 added by the government. For a child under 18, this is then not accessible for a long time (age 55 at the moment but this is currently under consultation to increase) during which they could be further pension rule changes. So if there’s other ways you can save, it might be an idea to make use of these first.
Whilst it’s a sensible idea to help start helping your children and with the Junior ISA limit now at £9,000 per child you’d be able to move the full amount over. However, it can depend on age to determine if investing is a good idea. At an older range 13 or over, it would be 5 years or less before the money could be accessed in a Junior ISA. If the money is going to be used (first car purchase?) when they reach 18 it might not be appropriate to go for the investment option. You also might not want your children to have access to the money at 18. Whilst you might hope they’ll use it in a very sensible manner, they can always choose to splurge on something else entirely as at 18 it’s their money. If you’re not already making use of your own ISA allowance (and potentially consider a taxable investment too), you could consider keeping it in your own money and gifting in future. This also means if for some reason you ever did need the funds yourself, you could access them.
In terms of selecting a provider, the cheapest doesn’t always mean the best. It’s important to decide on what features you must have, what you would like to have and any compromises you might make to save on cost.
Do you want the option of having a slick online system that is low cost, but offers limited telephone support. There’s a number of ways to check other’s experience so take a look through different review sites.
Are you looking to buy funds only and hold them or buy a portfolio of funds and make changes? If you want to purchase certain funds, then you should also check if a provider has negotiated a discount to the standard fund charges.
If you don’t want to pick the funds yourself, what options are available.
What analysis do you want to have access to? Some people are happy to see the amount paid in and a current value. You may want to see performance by fund or some of the risk indicators such as volatility.
What and where are the underlying investments made. If you have specific preferences such as avoiding certain areas (such as oil or armaments) can this be facilitated.
Do you want the option of engaging more with the company you’ve invested in or voting or are you happy that someone else will be making these decisions on your behalf?
Will you be paying in one lump sum or make regular contributions or top ups in future. Would a fixed fee option be more suitable or percentage charging and are there any caps on the fee.
Is the provider going to be one that sticks around or are they going to sell in future and mean you get a lower quality service?
Deciding on these options should help you determine the value and if makes your life a bit easier, then sometimes paying a bit more is worth it.
Capital at risk. The value of investments and the income from them can fall as well as rise and the investor may not receive back the original amount invested.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice before making decisions. HMRC Tax Year 2020/21.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.
Tim has always wanted to help people and his psychology background has allowed him to combine a love of numbers and understanding behaviours in financial planning, with various degrees and qualifications to prove it. Tim is a born and bred Bristolian and other than a couple of stints further north as part of University degrees, has lived in various parts of his fantastic hometown his whole life.