What ought to my son do together with his Child Trust Fund financial savings? | USAEMALL.com

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I’m trying to teach my eldest son the value of investing, but have realised my limitations. Thanks to Gordon Brown’s Labour government, he got an early savings boost from Child Trust Fund money, topped up with more from us over the years, which he switched to a high-interest savings account when he turned 18. A year on, he is thinking about putting it into shares, but does not know where to start in terms of how to build a portfolio and the most tax-efficient way to do this. Can you help?

Jason Hollands, managing director of Bestinvest, an online platform, says before deciding on an investment approach, it is important to choose an account type that will ensure any returns made are sheltered from tax. The most flexible option is a stocks and shares individual savings account (Isa) as any income or gains made within one will be tax-free, but importantly there are no restrictions on making withdrawals.

Child Trust Funds automatically convert to Isas when the child turns 18, but it sounds like your son’s CTF may have been closed and the proceeds switched to a savings account. If this is the case, he can open a new adult Isa with a subscription of up to £20,000 before the end of the current tax year in April. Choose an online broker or platform that offers a wide range of investments.

However, given your son’s age, it is worth looking at another option: a lifetime Isa (Lisa). These are designed specifically for younger people looking to build savings towards the purchase of their first home (or retirement). People between age 18 and 40 can start saving up to £4,000 a year into a Lisa and for every contribution they make, the government will add a 25 per cent bonus to the amount saved, up to a maximum of £1,000 a year. The catch for this “free money” is that withdrawals made before age 60 for any purpose other than buying a first property will be subject to a 25 per cent withdrawal penalty.

When it comes to building the portfolio within his chosen account, your son could opt to pick a selection of individual shares, but this isn’t the usual first step for a novice investor and it can be risky doing so. He will need to do his own research, understand the earnings outlook, keep an eye on results announcements and evaluate whether their share valuations are reasonable or overvalued. Stock pickers must keep a close eye on their holdings and consider when it is time to sell a holding. Alongside this, he will need to ensure the portfolio is sufficiently diversified across a number of companies and different industry sectors.

Rather than building a stock portfolio from scratch, a better way to start out, at least until his knowledge and confidence grows, would be to construct a portfolio of funds and investment trusts. Each of these structures provide investors with diversified portfolios of underlying investments chosen by a fund manager, or a selection of investments that replicate an overall market (an index tracker). The advantage of building a portfolio in this manner is that investors can achieve much greater diversification across companies and markets than they would be able to do themselves and, if they choose carefully, select managers with strong records of beating the markets they invest in.

Funds and trusts typically invest in between 30 to 150 holdings (in the case of tracker funds more). By spreading his cash across half a dozen funds that each focus on different markets such as the US, UK, Europe, Japan and Emerging Markets, your son can achieve a truly global investment portfolio across hundreds of underlying companies.

Is my non-dom husband about to spark a custody battle?

My husband was born overseas and has strong ties to his home country. He’s thinking of moving back there because of the non-dom reforms, which mean he may have to pay more tax. I’m really worried about what that means for our family. I want to stay in the UK with our children, but he seems determined to go. If we cannot agree, I really fear disputes over custody, relocation or even the risk of him taking the children without my consent. Is there anything I can do to stop this from happening before it’s too late?

Lora Clark, legal executive in family law at TWM Solicitors, says the planned increases to taxes on non-doms have led to reports that many people not domiciled in the UK plan to leave the country. If your husband does leave the jurisdiction, irrespective of your views, difficulties may arise if you can’t agree on the arrangements for your children.

Where a wife suspects a husband may attempt to take the children without her consent she can seek a court order to prevent this. As a precaution she could retain and keep the children’s passports safe.

Another problem that sometimes occurs is where one parent, with the other’s approval, takes the children on what is described as a holiday and they do not return (known as wrongful retention). 

If you suspect such a move might be imminent you can apply to the court for both a child arrangements order and a prohibited steps order. You can request the prohibited steps order to be heard urgently. Such an order, if granted, will state the husband (and sometimes both parents) are prohibited from removing the children from their home country pending the full application being heard. 

There is also a risk that your husband could apply for a specific issue order. This permits him to remove children permanently from the jurisdiction to his country of origin. At the same time, he can also seek a child arrangements order that the children live with him.

It would also be wise for you to take preventive steps as once the children have left the country, it will be a difficult process to recover them.

Matters are made even more complicated if your children have been removed to a non-1980 Hague Convention country. This is because there is no reciprocal arrangement for children to be returned, as there is under the rules of the Hague Convention. The UK signed up to the Hague Convention in 1984 and there are currently 81 other member countries. If the children have been removed to a non-Hague Convention country (such as Qatar or the UAE), applications will need to be made to the court seeking orders for the children’s return. 

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com.