Monthly savings plan

By THIS IS MONEY
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My wife and I want to start a regular monthly savings plan to provide a lump sum in about 20 years' time. We have children and my wife pays standard rate tax. We want to be able to increase the monthly amount if we get the chance. Any simple suggestions? DG, Marlow Bottom, Bucks.

Martyn Laverick of independent financial adviser Chartwell Investment Management says: Your simplest solution would probably be a UK index tracking unit trust. This is a collective investment that tracks the UK stockmarket.

The stockmarket has historically outperformed bank and building society deposit accounts over the long term and with a 20-year investment there should be time for the short-term ups and downs in the stockmarket to be ironed out. Tracker funds like this are cheaper to get into and run than managed funds and in quite a few cases have out-performed them.

Best recent performers include Virgin, Legal and General and HSBC or see unit trust tables on this site. You could put your investment into an ISA to save tax. Other options include maxi-ISAs that include other forms of stock market-based investment.

Avoid endowments (and there may be any number of sales people who keen to offer them to you because commissions are high). They are inflexible - increasing your contributions could bring high charges. There are also penalties associated with stopping and starting them. And as you want to invest over such a long time, cash investment like building society and bank accounts are probably worth avoiding if you can stomach a bit of risk as stock market-based investments will give better returns.

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