CTFs, am I doing it wrong?

cooper_d wrote: »

In fact I can't even work out what the charges are on my existing F&C CTFs, so as I know what I have to beat.

The 'Key Investor Information' that I found in my bumpf, says 5% entry charge and 0.36% Ongoing charges. But no exit charge and no performance charge. However I can't seem to square this with the figures on my last annual statement (photo attached) where the Managment Fees seem to be about 0.68%. ????

Well, during the year you put in £120. 5% entry charge on that would be £6. And you had somewhere between £1800 and £1900 total assets invested during the year, so ongoing charges on that at 0.36% would be another 6 and a bit pounds. So from what you're telling us, overall the charge of £12 and a bit for 'management and administration fees' on the photo would stack up with what you thought the fees were.

However, that all seems to be a red herring and a coincidence on the numbers as I think you misunderstand the fee structure. The way they do it is to charge an annual fee for maintaining your CTF account (which would be visible on your statement as a management/admin fee line) and then the management fees and operating costs of running the underlying investment fund in which you're invested (the FTSE all-share tracker) will be taken periodically out of the fund itself, and directly affect the investment returns shown.

That is how most providers do it, which you can use as a basis of comparison with other F&C options or with H&L or CSD etc etc:

- an explicit fee for administering a CTF/ JISA account for you
- perhaps some costs for each purchase and sale of investments within your acct
- the investment fund itself costs money to run and has some charges which are wrapped up in the overall performance of the investment that you choose to hold in the CTF / JISA

With F&C the CTF product has two options (http://www.fandc.com/uk/private-investors/savings-plans/savings-plans-range/child-trust-fund/):

1) A regular share account which can invest in any of their investment trusts.

This costs:
- Admin fee of £25 a year;
- government stamp duty of 0.5% (not 5%) when buying each monthly investment;
- ongoing management fees and charges inside the investment fund, which can vary from about 0.6% to 1.8% of the fund value each year, depending which of their investment trusts you chose

2) A stakeholder account which can only invest in the UK tracker but will accept lower monthly contributions of a tenner a month instead of the £25 a month for the general share account.

- Admin fee of 0.7% a year;
- No stamp duty because it's not an investment trust and no other purchase costs or entry fees;
- ongoing management fees and charges inside the investment fund, which are estimated at 0.36% for the UK tracker (which is the only choice)

They mention that with a stakeholder product the total charges are capped by government rules at 1.5% which the (0.7% + 0.36%) is comfortably below.
---

So if you look at your summary statement. You took the stakeholder option so would expect admin fee of 0.7% a year. You had an asset value of around £1800-£1900 invested over the period, I'm not sure what the exact average would be depending on when it rose and fell over the course of the year, and most of your annual contributions hadn't been paid in for the first half of the year, but basically a fee of £12-£13 would be expected. On the line showing the management / admin fee for the account, you have a charge of £12.35, so that seems fine.

You will also have been exposed to fund running costs of 0.36% per year within the fund. In other words, the line showing 'increase in value of investments' would have been higher if they could somehow have run the fund for nothing. In determining the final 31 December price for the UK tracker fund they have allocated the annual running costs to all the owners of the fund and your share of it will have been about £6-7 on your £1800-1900 investment. But you don't see that explicitly on your statement it is just wrapped up in the performance line (in other words, the performance would have been closer to £18-19 if the 0.36% charge within the fund didn't exist).