Questions Of Cash: How can I invest for my granddaughter?

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Q. My granddaughter is five and so ineligible for the Government's £250 Child Trust Fund. We save £25 a month for her with a friendly society, but would also like to make a stock market-based investment on her behalf. What would you suggest?
CP, by e-mail

A. Philippa Gee, investments director at the independent financial adviser Torquil Clark, says: "There are many routes you could take. Your choice should be determined by how long you want to invest the money, how much you are prepared to invest, and the level of risk you are willing to tolerate.

"Options range from the low-risk National Savings Children Bonus Bond, which will take any amount from £25 to £3,000, offering a fixed rate for five years, tax-free, and then, at the end of every five years, is reinvested until the child is 21. The returns are not stunning, but it is a solid investment.

"At the other end of the spectrum you could invest into a unit trust fund (but make sure you include the child's initials in the account designation). This fund could invest in equities and you could choose anything from an ethical fund to a globally diversified offering."

Q. Three years ago, my wife and I took out an interest-only mortgage with Portman Building Society. We decided to redeem it at the end of the three-year fixed-rate period. I wrote to Portman and received a redemption statement for 2 April, the earliest possible date without incurring an early redemption charge.

I sent off the payment in time for cheques to clear, as requested. We were surprised to receive a letter dated 15 March informing us that the mortgage had now been redeemed and that the buildings and contents insurance had been cancelled as of 13 March. We had understood that this would happen as of 2 April and had taken out new insurance policies with a new provider with effect from 1 April. Portman confirmed that we were now not insured, despite the early redemption date being its error. We believe that we should either be given an extension of the cover, or a refund of some of the premium paid, but Portman said neither was possible.
RC, Billingshurst

A. Portman accepts that you were given incorrect information by its staff, who should have enabled you to extend the insurance cover despite the unintended cancellation of the policy by Portman. The building society has reinstated the cover for the period wrongly cancelled and is refunding you £51.10 for the premium for April, which had been collected by it, plus an additional £25 as compensation for your inconvenience.

Q. I would like to open a savings account on behalf of my baby granddaughter. She is a French national, living in France, but I would like her to have a UK account that I could easily access to put money into it. When she reaches 18, she might close the account and transfer the balance to an account of her choice. Nationwide told me that it's not possible to open an account for her in the UK. Is this correct?
HH, Sale

A. The answer you were given was incomplete, at best. Nationwide in the UK will only open accounts for children under 12 in the name of a parent. But Nationwide can open accounts for children under 12 who are not UK-resident through its offshore savings subsidiary, Nationwide International. You need to open the account, acting as account trustee and designating your grand-daughter as beneficiary. Nationwide requires proof of identity documents for you and your granddaughter. Residence of trustee and beneficiary are immaterial, except for tax purposes. The account can be opened by post, with application forms downloadable online at www.nationwideinternational.com.

Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; cash@independent.co.uk.

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