My
5 grandchildren are aged between 21 months and 7 yrs and last year I decided to
start a regular savings plan with Baillie Gifford and to put aside a regular
monthly sum of £50 with the option of adding the odd lump sum amount from time
to time.
I am fairly
traditional 'old school' when it comes to money and remember what I was like at
the age of 17 or 18 yrs and what I may well have done with a large sum of money
at a young age. I therefore want some control over the account as I would like
them to have the money a little later, maybe at the age of 21 yrs (earliest)
rather than 16 or 18. This rules out a few options such as junior ISAs and bare
trusts set up in the children's own name.
The plan is
therefore in my name with the grandchildren all named as designated
beneficiaries. The plan offers a low cost way of saving via a range of
investment trusts.
There are 4
global trusts :
Scottish
Mortgage
Monks
Scottish
American
Edinburgh
Worldwide
and 3
trusts which focus on the Far East:
Baillie
Gifford Japan
Baillie
Gifford Shin Nippon
Pacific
Horizon
Flexible
The plan
will run for the next 15 to 20 years or so and over this timeframe I am
obviously looking at global growth. Although I
am starting with the one investment trust, I do have the option to split my
monthly contributions between two or more trusts. The minimum is £25 for each
trust and there is the option for a lump sum addition into any trust - min
£100.
The Trust
Choice (But Note Changes to Come)
To start
off I have selected the Scottish Mortgage trust as this is the largest global
trust with the lowest ongoing charges. I am obviously familiar with SMT as I
hold it in my own SIPP and ISA. The managers have a good reputation for
consistent performance in areas which I believe will provide a good chance of
out-performance over the coming years. It has turned £1,000 into £8,000 over
the past 10 years which equates to an average of over 23% per year. At this
rate, an annual contribution of £1,000 over 15 years would grow to just over £60,000.
However this period is not typical as it has the distortion of the financial
crash of 2008/09. I am hoping for a return of nearer 10% per year. If it can
deliver anything near this over the coming years my grandchildren will have a
tidy sum in the region of £8,000 each - fingers crossed.
Charges
For the
best long-term returns, it is important to ensure the costs of the investment
are low. This is one of the reasons the low cost index funds generally out
perform the more expensive managed funds. The big advantage of the savings plan
is there are no platform charges from Baillie Gifford and also no transaction
charges for the purchase of shares which is important when a monthly drip-feed
plan is operating. Therefore the only charges will be the ongoing charges for
the Scottish Mortgage trust of 0.37%. There is however a charge of £22 for each
withdrawal but as I am not planning on this for many years it should not be a
problem.
Performance
- End of Year 1
I started
off with an initial lump sum of £200 and have 12x monthly contributions of £50
into Scottish Mortgage - total £800. The share price has ranged from £4.45 to
£5.60p so some months have seen a relatively high price such as last Summer, which means less shares
purchased. I have therefore accumulated a total of 159 shares at an average
price of £5.00.
![]() |
Scottish Mortgage Share Price - Past Year |
I have also
invested a one-off lump sum of £100 into Edinburgh Worldwide taking advantage
of the dip in the share prices last December. So, an additional 60 shares
purchased at £1.64 and currently £1.88.
The total
contributions over the year have been £900 and the current value is £970 - a
return of £70. So far, so good.
BG Drops
Savings Scheme
I just
heard yesterday that Baillie Gifford have decided to abandon the savings scheme and transfer
all customers accounts to Hargreaves Lansdown. This will ultimately involve transaction
fees on the monthly contributions for investment trusts (funds are free) as
well as platform fees of 0.45%. However, I understand the free dealing/platform
arrangement currently in place with BG will continue for 3 years after the
transition. The advantage will be the investments will not be limited to the 9
BG trusts so I could look at the wider market and possibly something
climate-friendly such as BGs Positive Change fund or WHEB Sustainability.
I am
awaiting further details from BG. While I consider all the changes and
implications, I will continue to drip feed my £50/month into the Scottish
Mortgage trust with HL for the time being. The share price can be volatile but
the drip feed is a good way to even out the swings.
Feel free
to comment if you are currently saving for children or grandchildren and share your
experience with others.