Questions of Cash: How I got a shock over the fees on my four grandchildren's savings

 

Q. Can you believe that some children's savings accounts take out more in fees than they generate in dividends? I have four investment dealing accounts for my four grandchildren with Alliance Trust Savings, which I have held for several years. The dividends were paid into the account and when there was enough, more shares bought. I had been very happy with the way the value of these accounts was growing, especially when there was a rapid growth in the share price. But now I have had a nasty shock.

Since last August, a £12 fee is charged every time a dividend is paid in. As the largest dividend for the oldest child was £17 and the smallest was just £10 they are actually taking out more than they are paying in for the youngest child. I wrote to complain and was told I had an email last June explaining a new fee structure had been introduced. I must have inadvertently deleted it without reading it. MS, Cirencester.

A. Your situation is not unique and it is increasingly difficult to keep the investment accounts of different children separate without incurring very high fees. Alliance Trust Savings stresses that the deductions are quarterly administration charges, introduced a year ago.

A spokesman says: "We suggested in our letter to [the reader] that, if appropriate, she could consolidate her accounts into one First Steps account to reduce the account administration fees she was paying... We appreciate there may be an important reason why [the reader] has several investment dealing accounts set up, but if it was an option for her to consolidate the four accounts into one, this would mean significantly lower costs with one account administration charge."

Alliance Trust uses a charging model based on flat fees, which it believes is transparent and avoids retaining any fund commission. "We could not continue to absorb a high proportion of administration costs as we have in the past," says its spokesman. He adds that it hopes to reach an acceptable solution with you through continued discussion.

However, you may need to find a different provider, says Danny Cox of advisers Hargreaves Lansdown. "Investment accounts for children are usually kept separate by the investor as this makes them much simpler and more equitable to distribute and manage," he adds. "With one holding, trying to split this fairly as each child reaches age 18 may be difficult to work out. Unfortunately flat fees and dividend reinvestment do not always suit the small investor.

It may also be better to use a provider which charges a percentage rather than a flat fee and use a fund where there is no charge for dividend reinvestment, rather than an investment trust. There are a few who offer this. However, the platform market is going through some change at the moment and not all platforms are in a position to offer commission-free share classes at the moment. HL is in the process of negotiating lower cost commission-free funds and expects to launch these probably in January next year. Others, including Bestinvest, have also yet to announce or launch theirs. One option would be to wait until all the platforms have launched their pricing before deciding whether to switch and to whom."

Q. In September 2008, on the advice of an IFA, I invested £10,000 in the JPM Cautious Total Return Fund. The fund stated it was "designed to deliver positive returns - aims to beat the return on cash – one month LIBOR - by an average of 3 per cent per annum over the medium term, for example three years". I thought that being linked to LIBOR was a stable benchmark. Given banks' manipulation of LIBOR, does this make the fund not fit for purpose? The finance industry seems to have been aware of the problems with LIBOR at the time the investment was sold - so was it mis-sold? On the latest valuation, the investment was worth less than the sum invested. PS, Keighley.

A. You were advised by Paramount Group, which is now part of Towergate Financial. It has investigated and says the fund was not linked to LIBOR: it was merely felt this was a reasonable investment benchmark. It also says the risk profile of the fund is lower than your assessed attitude to risk, so Towergate does not believe it was mis-sold. You have now sold for a small profit.

Q. My wife and I had a road accident. We had just left the M4 and were heading towards Chippenham, and were being followed quite closely by a van with the Norland [Managed Services] logo. We stopped at the first roundabout after the motorway and waited for traffic to clear from the right. As we were about to move off the van hit us with some force from the rear. The driver of the van gave me details of the ownership of the van, but declined to give his address. My insurer, LV, has put in place arrangements for repair, but I am liable for the first £100 of the cost unless Norland accepts responsibility. DK, by email.

A. This is now resolved to your satisfaction. Tommy Meikle, managing director of the UK Services Division at Norland, says: "Our driver did fail to provide his address, which he is required to do under the Road Traffic Act. As this was a company van, he gave the company address not realising he had to give his own as well. He has been advised of his error. In the event that the insurance company finds Norland's driver to be at fault, as a gesture of goodwill Norland will pay the £100 excess."

Questions of Cash cannot give individual advice. But if you have a financial dilemma, we'll do our best to help. Please email us at: questionsofcash@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
News
Jamie and Emily Pharro discovering their friend's prank
video
Arts and Entertainment
Taylor Swift crawls through the legs of twerking dancers in her 'Shake It Off' music video
musicEarl Sweatshirt thinks so
PROMOTED VIDEO
Arts and Entertainment
Daniel Radcliffe and Zoe Kazan in What If
filmReview: Actor swaps Harry Potter for Cary Grant in What If
News
Our resilience to stress is to a large extent determined by our genes
science
Travel
travel
Arts and Entertainment
tv
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Pornography is more accessible - and harder to avoid - than ever
news... but they still admit watching it
Arts and Entertainment
The eyes have it: Kate Bush
musicKate Bush asks fans not to take photos at London gigs
News
i100
Extras
indybest
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Junior Database developer (SQL, T-SQL, Excel, SSRS, Crystal rep

    £25000 - £30000 per annum + bonus+benefits+package: Harrington Starr: Junior D...

    Java/Calypso Developer

    £600 - £800 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, ...

    Quantitative Developer

    £700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

    Web developer (C#, MVC4, HTML5, CSS3, Javascript, Jquery)

    £30000 - £44000 per annum + Bonus+Benefits+Package: Harrington Starr: Web deve...

    Day In a Page

    Ferguson: In the heartlands of America, a descent into madness

    A descent into madness in America's heartlands

    David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
    BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

    BBC faces corruption allegation over its Sir Cliff police raid coverage

    Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
    Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

    Lauded therapist still in limbo as battle to stay in Britain drags on

    Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
    Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

    Lewis Fry Richardson's weather forecasts changed the world...

    But could his predictions of war do the same?
    Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

    'I want to have contact with the audience, not iPhones'

    Kate Bush asks fans not to take photos at her London gigs
    Under-35s have rated gardening in their top five favourite leisure activities, but why?

    Young at hort

    Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
    Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

    Beyond a joke

    Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
    The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

    The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

    Sadly though, the Lawrence of Arabia star is not around to lend his own critique
    Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

    A wild night out

    Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
    Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

    Comic Sans for Cancer exhibition

    It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
    Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

    Besiktas vs Arsenal

    Five things we learnt from the Champions League first-leg tie
    Rory McIlroy a smash hit on the US talk show circuit

    Rory McIlroy a smash hit on the US talk show circuit

    As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
    Boy racer Max Verstappen stays relaxed over step up to Formula One

    Boy racer Max Verstappen stays relaxed over step up to F1

    The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
    Fear brings the enemies of Isis together at last

    Fear brings the enemies of Isis together at last

    But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
    Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

    Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

    Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment