Investor Views: "We’ve Trebled our Money Over a Decade"

Private investor Michael Schofield tells Morningstar how an inheritance should help his grandchildren to get on the property ladder

Emma Simon 10 December, 2015 | 9:00AM
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Children’s savings plans are not just for babes in arms. Michael Schofield, a retired entrepreneur, invested a lump sum on behalf of his grandchildren, the eldest of who was just turning 18.

These investments are still going strong, and his grandson, Jon, now aged almost 30, hopes to use this capital to pay for a deposit on his first home.

Schofield says: “My aunt died almost 12 years ago, and left my grandson and granddaughter a sum of money. My daughter wasn’t sure how best to invest it for their future so asked me for advice.”

Initially the money was invested in a savings account, but the returns were very low. Schofield explains: “I did a bit of research online and wanted to try a children’s investment account instead. I felt it would be more tax efficient - and would hopefully provide a much better return over the longer term.”

Michael Schofield and his grandchildren Alex and JonHe decided the Jump account offered one of the best options. This invests in the Witan Investment Trust (WTAN).

Before opening an account for his grandson, and grand-daughter Alex, then aged 11, he sought the opinion of a financial adviser. He says: “They seemed to agree this was one of the better savings options for children. It had a good track record and was a relatively low-cost option, so we decided to go ahead with this investment.”

He has not regretted this decision. In the last twelve years the value of these savings plans has more than trebled. He says: “In fact it’s closer to three and a half time what we put in. We are very pleased with the return.”

Silver Rated Trust Delivers

Morningstar analysts agree that the Witan Investment Trust has been a good solid performer. Andrew Bell has been the manager and chief executive of the trust since 2010 and his strong performance means he has a coveted Silver Rating. Stellar performance has earned the trust five-stars, the highest rating.

A closed-end fund analyst at Morningstar said: “Witan Investment Trust is serving its shareholders well. The fund is competitively priced, particularly when compared with open-ended global equity funds-of-funds.”

They add: “Since Bell took over, results at Witan have improved. The board has maintained its excellent track record at paying a rising dividend each year for four decades. Overall, there’s much to give us confidence at Witan: their strategy is clear and well executed, the fund is competitively priced, and results are solid.”

Schofield points out that when he was investing this money there wasn’t the option to take out a Junior ISA, as there is now and both his grandchildren were born too late to qualify for a Child Trust Fund. But this Witan Jump savings scheme offers both CTF and JISA options.

Tax Efficient Long Term Investing

However a children’s savings plan can still be tax-efficient. If they are set up as a ‘Bare Trust’ they are treated as belonging to the child for tax purposes, and as most children don’t earn any income, this means that there is usually no additional tax to pay on earnings within the fund.

Schofield adds: “At 18 you might not be thinking of a long-term savings option for children. But I did point out to them that their great-aunt was quite religious and probably didn’t want the money being spent on clubbing on booze.

“To be fair to them they’ve understood this, and I haven’t had them asking whether they can cash in this savings plan. My aunt would have been thrilled that it has been invested and grown over this period and will hopefully be used to fund a deposit on a house.”

Schofield says he has sought financial advice in the past, when it comes to his own pensions and investments. “If you’ve got a reasonable amount of money I think it makes sense to seek specialist advice. There are times when you need the help of a professional.”

He says he’s invested in various pensions and funds over the years, as he has largely been self-employed, so hasn’t had access to company pension schemes. “I first took out a pension in 1971. The type of pensions available and the regulations have changed a lot since then.”

He said he generally sought financial advice about pension and retirement  matters, as his main focus has been on the businesses he ran.

Schofield opened the first mobile phone shop in the UK after the market became deregulated in the 1980s.  He says the shop, in Christchurch, Dorset. opened its doors at six am. “We probably didn’t get a customer until nearer 11pm but we were officially the first shop open in the UK.”

After working in this industry for a  number of years, he then moved into the property market, owning flats, and then holiday homes. Schofield sold his business to help fund his retirement.

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About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk