Child Trust Funds discussion area

westernpromise

small wrote:

I have a quick question.

I have 2 kids - one born in October this year and one born in July 2002. The eldest misses out the CTF.

My question is - How much would I put into an account now to match what he would have had now if CTF were running?

I think I need to do something now to ensure that both of them have something behind them.

I (and hopefully the grandparents) will be making regular once the his and the CTF accounts are up and running.

The benchmark was September 2002 so any child born in the year after that date gets £277. This supposedly reflects 2 years worth of interest. Children born since Sep 2004 get the basic £250. Most of your questions are probably answered here: http://www.childtrustfund.gov.uk/Homepage/fs/en, which also has a link to the 75 providers of cash and equity CTFs.

There is something called a "bare trust" which essentially provides the same tax benefit as a CTF:-
http://www.company-wizard.co.uk/Glossary/Bare_Trust.htm

and

http://www.moneyworld.co.uk/glossary/gl00179.htm.

If you want to replicate the benefit to your eldest of the youngest's CTF, you could set up a bare trust and put £277 in yourself.

Note that a child can receive up to £100 in interest a year tax free. This means that you are better off putting the first ~£2,000 into a child's savings account than into a CTF. The interest rate is the same, it's tax free, and you can withdraw the money at any time. With a CTF it's locked away indefinitely.

westernpromise

lipidicman wrote:

Its credited in the account - if it was in 18 years time you would lose out on the interest - or the then govt might not pay!

Technically it's an both, I think. The govt gives CTF providers an IOU which is negotiable like any govt bond is negotiable, but can't be redeemed for cash for 18 years.

As far as the child's concerned it's an IOU...

isasmurf

If you can't wait for Martin's article he's promised us in a couple of weeks, here's a link to compare all Cash CTFs.

sonsam

The Child Trust funds seems to have left parents with a choice as to where to put their childrens money for the best return. I generally accept that the choices that allow investing in shares will give a better return but why would one choose a stakeholder over another share investment account. I know stakeholder accounts have fixed charges but what charges is one liable to incur for other accounts? and, if fixed charges are good and competitive, is there other downsides of investing in stakeholder accounts? Are the returns for stakeholder accounts comparable with other share-investing accounts?
Also, stakeholder accounts start to move funds away from the more risky share type investments when the child is 13. Is there any reason to suppose one can't do this for oneself?
Thanks

Thom68

isasmurf wrote:

For cash CTF accounts the incentive will be that you can build up 18 years worth of £1,200 deposits and receive the interest on them tax free. Doing this outside a CTF is likely to take you above the '£100 gift to a child rule' which would mean the interest would be liable to tax at the parents tax rate. That would depend on the individual account. Most would probably calculate interest daily and pay it annually.

I think this is slightly wrong - there is no £100 gift to achild rule. A parent can give any amount of cash to children outside a CTF. The restrictions are that it may be liable to IHT (in the normal way) and that income from gifts from parents can not exceed £100 a year (per parent, I think). Non-parents are subject to IHT but not the £100 a year income rule. Within the CTF there are no tax implications as far as I am aware and CTF money won't count against means-tested benefits.

Thom

Thom68

cloud_dog wrote:

Thought I'd posted this - maybe I did on the wrong thread

Anyway have always going to take out a stocks / shares CTF but have decided that I will go through https://www.comdirect.co.uk, with the investment going into the L&G UK Index Fund.

There are cheaper ways to get an index tracker. Comdirect also offer a self-select CTF. This works like a standard share trading account (12.50 per trade as far as I can see - no annual charge). The cheap option might be to load up the CTF with cash and buy shares when the sum is big enough. I don't know what can be traded, but they'll certainly have investment trusts (ITs)available. These have lower costs than unit trusts like the L&G fund and there are some index tracking ITs. Personally, I would not pick an index tracker but look for a generalist trust with low charges and a good long term track record (suprisingly there are quite a few around). You could also go for much riskier options - with the potential to rocket up (or crash).

I'm still waiting for more details to decide.

Thom

cloud_dog

Thom

My intention (though it doesn't come across that clearly) is to take out a CTF ComDirect account as I (Mrs Cloud_dog) already have a trading account with them. There are a large number of assumptions in my consideration and my thoughts/views are pretty fluid until CTF providers clarify the situation.

The idea of going with ComDirect is that at some point I would start to actively trade the investment (once it is if a reasonable size) - again assuming this is allowed under CTF rules.

The idea of investing the tracker fund is to accommodate small monthly investments. I like the L&G one as its charges are very low. The unknown is if Comdirect will charge commission for each months investment; if they do then this is a non-runner and I will come up with something else.

Have looked at the CTF providers and appart from goin with the above will all have standard family investmetns in mind. Going with ComDirect allows the flexibility (hopefully) to change investment strategy, etc.

My view on IT's is that first time investors should stick with UT's or OIEC's and more seasoned investos, who can weigh up the pro's and con's of the discount / premium would like them and the different asset class(es) offered.

cloud_dog

bylromarha

You may as well wait for Martin's advice...any CTF cheque banked today will not start earning interest until April 2005...I still haven't got my (my son's!) cheque, so makes it fair for all.

Has been briefly mentioned b4 on this thread but Martin, I would appreciate advice on the ethical providers of CTF...just want to know who is going to benefit, and lose out, from our investing our returned cash.

isasmurf

As far as I am aware there is only one ethical CTF fund, and that is provided by the Co-op.

This is proving a problem for Muslims as Islamic Sharia law is very strict about what they can invest in and how profits are delivered. It's so strict even the Co-ops ethical fund breaks Sharia law.

deemy2004

The co-op is probably the worst bank to bank with.