Fiddich Review Centre
Alternative Investment

How can I grow my children’s nest eggs ethically?

  • This investor wants to use her children’s Jisas, and her own Sipp and Isa to help fund their university and adult life costs
  • Although the majority of the children’s portfolios should be in equities at the moment a bond could be a good addition
  • She could also consider adding property and alternative assets for diversification, preserving purchasing power and long-term growth

Reader Portfolio

Katarina’s children

10 and 7


Junior Sipps and Jisas invested in funds and direct shareholdings


Build up children’s and own Sipps and Isas to help cover university costs and adult life expenses, prioritise saving into Junior Sipps and own accounts, protect Isas from inflation and target long-term growth with pensions, invest ethically with simple portfolios, invest children’s portfolios in same way as each other, limit costs of investing, involve children in account management when older.

Portfolio type

Investing for children

Katarina is 42 and earns £95,000 a year before tax. She has two children aged seven and 10. She contributes £250 a month to their junior individual savings accounts (Jisas) although will stop doing this at the end of the tax year. She also contributes £2,880 a year to each of their junior self-invested personal pensions (Sipps).

“My children each receive £5,000 a year in pension benefits from their late father’s scheme, which partly covers their school fees,” says Katarina. “These payouts will continue until they are age 23 if they remain in full-time education. My children’s Jisas are intended to supplement this or whatever goals they choose to pursue from age 18 onwards.

“After the unexpected death of my husband, we downsized to a smaller property and were left with a relatively large cash sum, which I have gradually moved into individual savings accounts (Isas) and pensions for myself and my two children using the annual allowances. Now that I have done this, I will fund future contributions from my income alone so it is likely that they will be smaller. 

“I also invest in my own Isa and Sipp and will use these to support my children‘s higher education costs as I also have a defined-benefit (DB) workplace pension. My Isa and Sipp are each worth about £100,000.

“I aim to teach my children the value of money and its management, and hope that they will treat the funds with respect when they take ownership of them in adulthood. However, as the value of their Jisas is now quite substantial, I plan to prioritise contributions to their pensions and save for future costs such as university within my own investments.

“I hope to involve the children in the choice or management of the investments as they get older. I want to grow their investments ethically within a straightforward portfolio that they will be able to understand when management passes to them in adulthood, as they may not share my interest in managing investments or want me to help them do this.

“I try to limit the costs of investing, so as the investment platform I use caps the annual cost of holding exchange-traded funds (ETFs) and investment trusts I favour these. But I also purchase funds via a free monthly investment plan. The arguments on the long-term outperformance and cost efficiency of passive funds are convincing, although active management has a role in specialist areas such as technology. I try to restrict active funds to less than half of the value of the overall portfolio, and preferably less than 25 per cent.

“I don’t have a targeted level of return, but would like to protect the Isas from inflation. I prioritise long-term growth with the pension funds as their long time horizon is a particular advantage.

“Since I started to invest seven years ago, there have been several significant periods of market volatility and the value of the portfolios have probably fluctuated by more than 30 per cent. This has not concerned me as the Isa money is unlikely to be needed for at least eight years, and I have made small monthly contributions throughout this time. I rarely sell holdings as I intend to hold them for the long term.

“The children’s portfolios are similar to each other but more by coincidence than design. So I would now like to apply the same investment principles to both their portfolios, although there might be subtle differences as the children are different ages.

“I aim to hold a variety of asset classes across a wide geographic area, although the portfolios are probably UK-focused. I prefer funds with an ethical mandate, and recent additions include JLEN Environmental Assets Group (JLEN). I also make regular monthly contributions to Vanguard ESG Emerging Markets All Cap Equity Index (IE00BKV0VZ05). I would also like to invest in an ethical property fund – ideally an ETF or investment trust – but can’t find one. So in the meantime I have invested in TR Property Investment Trust (TRY).

“I am not convinced about the benefits of holding bonds, but as their value has fallen so much recently I may add some exposure via Rathbone Ethical Bond Fund (GB00B77DQT14). However, this would mean I have to sell one of the existing holdings.

“I don’t have a specific process for selecting funds – I mainly rely on review articles in investment publications. 

“I used to buy direct shareholdings and had some successes, but these also made my most substantial losses so I no longer buy them.”



10-year old’s portfolio
Jisa holdings Value (£) % of the Jisa
UBS MSCI ACWI Socially Responsible UCITS ETF (AWSG)  11,683 42.97
UBS MSCI United Kingdom IMI Socially Responsible UCITS ETF (UKSR) 3,440 12.65
Vanguard SRI European Stock (IE00B76VTL96) 3,246 11.94
BlackRock Frontiers Investment Trust (BRFI) 2,582 9.5
JLEN Environmental Assets Group (JLEN) 1,626 5.98
TR Property Investment Trust (TRY) 1,614 5.94
UBS MSCI World Socially Responsible UCITS ETF (UC44) 1,591 5.85
Vanguard ESG Emerging Markets All Cap Equity Index (IE00BKV0VZ05) 1,125 4.14
Lloyds Banking (LLOY) 282 1.04
Total 27,189  



Junior Sipp


Seven year old’s portfolio
Jisa holdings Value (£) % of the Jisa
UBS MSCI World Socially Responsible UCITS ETF (UC44) 7,768 33.17
UBS MSCI United Kingdom IMI Socially Responsible UCITS ETF (UKSR) 4,032 17.21
Vanguard ESG Emerging Markets All Cap Equity Index (IE00BKV0VZ05) 2,716 11.6
Vanguard SRI European Stock (IE00B76VTL96) 2,594 11.08
Scottish Mortgage Investment Trust (SMT) 2,241 9.57
BBGI Global Infrastructure (BBGI) 2,198 9.38
iShares Ageing Population UCITS ETF (AGES) 1,865 7.96
McColl’s Retail (MCLS) 8 0.03
Total 23,422  


Junior Sipp




Darius McDermott, managing director at Chelsea Financial Services, says:

You are taking a sensible approach to investing, understand that markets can sometimes be volatile, and are willing to ride out bad periods. Your children also seem to have a good financial start in life, with substantial amounts already invested on their behalf. But also think about your own pension and Isa, and consider increasing contributions to these to ensure that your financial future is as healthy your children’s.

Instead of setting money aside specifically for university fees in your Sipp or the Jisas, the money they receive from their late father’s pension could be used for university fees as it remains a benefit until the children are age 23 if they remain in full-time education. It would go a long way towards paying for university and keep debt to a minimum.

You want your children to understand the benefits of and take an interest in investing, and carry on investing in adult life. One way to do this is to hold funds that invest in things the children use and might get excited about. So, your holding in Scottish Mortgage Investment Trust (SMT) might be a good option because it invests in the company behind TikTok – ByteDance – Epic Games and Spotify (US:SPOT). Other active funds that invest in such areas include AXA Framlington Global Technology (GB00B4W52V57) and Sanlam Global Artificial Intelligence (IE000IKG3JC0)

You could maybe add these to the Jisas so that the children can talk about them from an early age and see the benefits earlier than with pensions as they can access these accounts from age 18. It may also encourage them to roll the Jisas into adult Isas at that point and keep investing in their pensions.

More ethical funds include Ninety One Global Environment (GB00BKT89K74), which only invests in companies that help to decarbonise the world, Artemis Positive Future (GB00BMVH5979) or LF Montanaro Better World (GB00BJRCFP12). To invest in property more ethically, you could consider one of a number of social housing real estate investment trusts (Reits) such as PRS REIT (PRSR), which builds houses for people on lower incomes.

The children’s Jisas and Sipps have a good core of passive funds, which is helpful for keeping costs down, but I’d have more than 25 per cent of these portfolios in active funds as they can really add value over time.

An allocation to Asian equities could be appropriate, perhaps via Stewart Investors Asia Pacific Leaders Sustainability (GB0033874768). And the children’s Sipps and Jisas could have more in smaller companies, an area that can do very well over long time periods. For exposure to these, I’d consider Liontrust UK Micro Cap (GB00BDFYHP14), Jupiter European Smaller Companies (GB00BKYBZ471), T. Rowe Price US Smaller Companies Equity (GB00BD446P55)Global Smaller Companies Trust (GST) or Baillie Gifford Shin Nippon (BGS). Small-caps are an area of the market where good active managers can really add a lot of value.

Keeping the majority of the portfolios in equities should help to protect them from inflationary forces, although with inflation where it is today, in the short term there is not much that can be done. That said, bonds are definitely starting to look interesting. Valuations are attractive and income levels have shot up. I wouldn’t normally suggest a bond fund for a child’s investment as equities tend to do better over the long term, but at the moment they are an interesting area for a short to medium-term investment to make the most of what is currently on offer. And Rathbone Ethical Bond is a great choice that meets your requirements.


Martin Watkins, financial adviser at SFIA Wealth Management, says:

You are taking a very active approach to building future financial security for yourself and your children, using the most tax-efficient vehicles possible. But with an income of £95,000, an NHS pension and personal contributions, also check that your own pensions will not breach the lifetime allowance, which is currently £1,073,100.

Your portfolios’ home bias to the UK means they are not well-diversified, potentially adding to risk. And you should be able to outpace inflation without as much as 30 per cent volatility. Not having a balanced portfolio adds risk and we would try to build up the ‘big picture’ of your situation so we could take a more holistic approach. 

What is the rationale behind your fund choices for the children, and how would you deal with differing balances in the future? The children’s accounts have long investment timelines – eight and 11 years for the Jisas, respectively, and much longer for the Sipps. So I would allocate around 90 per cent of them to equities, perhaps with some property and alternative assets for diversification to preserve purchasing power and capital growth over the long term.

Consider building risk-adjusted portfolios. A risk-rated, core-satellite approach seems logical, with passive funds at the cores, and more active, specialist funds making up the ‘satellite’ portions of the portfolios. This would meet your objective of restricting the proportion of active funds in the portfolios, and help to achieve better geographical and industry-wide diversification, and keep costs in check. But the investment platform you are using is expensive for open-ended funds.

Investing in environmental, social and governance (ESG) funds is a good option for long-term growth – ideally in a well-diversified, risk-rated portfolio to avoid concentration risk.

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