RATE MY PORTFOLIO ‘Should all my grandchildren’s savings be in a UK tracker?’

Starting a savings account for a child and contributing regularly is one of the most powerful financial gifts someone can give. The magic of compounding returns means that even a modest sum every month has the power to turn into a large portfolio. Doug Robertson, 75, from Cumbria, has been contributing £ 200 a month for more than a decade into Child Trust Funds for his two grandchildren. He has been investing everything into the Aviva UK Index Tracking fund, which owns Britain’s 600 largest companies.

Now aged 14 and 12, the portfolios are each worth about £30,000. But they could have been worth far more if they were invested more globally. The UK market, including dividends, has more than doubled in the past decade but the global market, which is dominated by large American technology stocks, is close to quadrupling.

“Have I been invested in the right market? There are still a number of years before my grandchildren turn 18 and get hold of their money, and I want it to grow as much as possible before then,” Mr Robertson, a retired operations manager, said.

He is also concerned that Child Trust Funds, which were offered to babies born between September 2002 and January 2011 and came with a £500 bonus from the Government, are not the right place for the money.

“Should I change them to Junior Isas so that they convert into an adult Isa at 18? They are held with Foresters Financial, a wealth manager, and I am concerned that the annual 1.5pc fee is too high,” he said.

Dennis Hall Chartered financial planner at Yellowtail Financial Planning

Mr Robertson would be better off if he transferred the Child Trust Fund into a Junior Isa. A problem with the Child Trust Fund is that on the child’s 18 birthday the account closes and sends the balance to the child. With the Junior Isa, the account converts into an Adult Isa and retains the tax-free status.

He would also do well to move it to another provider. A 1.5pc annual charge is very expensive, as the fee for the underlying fund is just 0.2pc a year. On a £30,000 portfolio that means £450 in charges, with only £60 going to Aviva for the fund costs.

By comparison, Fidelity does not charge platform fees on their Junior Isa, and Vanguard charges just 0.15pc, which is £45 on £30,000. There are no charges to transfer a Child Trust Fund away from Foresters.

I am pleased to see that the money has been invested in a cheap tracker, but I would suggest a global rather than a UK one. Vanguard’s FTSE Global All Cap Index has a 0.23pc charge. Similar funds are available from Aviva, HSBC and Legal & General.

Going global, and owning the biggest stocks from the US as well as Britain, is a far better investment strategy. An international fund owns the fastest-growing companies of the past decade, including Apple, Microsoft and Alphabet. This has meant that a global tracker has returned three times more than a UK tracker over the past 10 years.

Don Fraser Chartered financial planner at Capital Asset Management

Foresters offers a range of investment options, including “fund of fund” portfolios, which contain a basket of different funds and therefore spread risk and bring new investment opportunities.

However, moving to a Junior Isa with a wider offering would give Mr Robertson more investment options. The largest fund shops in Britain are Hargreaves Lansdown, Interactive Investor and AJ Bell. They all offer Junior Isas, and transfers are free.

However, we would suggest Mr Robertson keeps it simple and opts for a fund that owns a broad spread of stocks from around the world. Moreover, he would benefit from having some bonds in the portfolio as well.

We are big fans of Vanguard’s LifeStrategy range. The funds, which have varying levels of bonds in them to reduce volatility, contain about 22,000 holdings each, and the fees are very competitive, at 0.22pc a year.

The LifeStrategy 80pc Equity fund would be a strong choice. It has doubled the return of Mr Robertson’s FTSE tracker in the past decade. This shows the advantage of not investing solely in one market.