Child Trust Fund Alternative

dpc036

I have recently been advised to stopping paying into my daughters child trust fund and setup something else. The reason behind this advice being the trust is completely in her name, so when she is 18 the money is hers to do with what she likes.

Although i dont personally see this as a problem as i would like to save towards her future, i can see that it would also be beneficial to have some long term saving/investment which i can access if needed.

In researching the alternatives i came across the Baille Gifford Childrens saving plan www.bgchildsavings.com, which seems to me to be essentially the same thing as the CTF, but with the ability to have the investment in my name.

My daughter is 2 so i'd hope to have a reasonable amount saved/invested by the time she is 18.

I'd be interested to hear people's opinions of this option, would i be right to assume the offering is similar from other companies?

Thanks in advance
Paul

jimjames

Other companies do offer similar products and they are generally very flexible and good value. They are based on investment trusts so you have the risk (and benefits) associated with them.

The companies I use are F&C and Aberdeen for my kids.

Remember if the investments are in your name then if the income is over £100 pa it will be treated as yours and taxed accordingly.

dunstonh

unit trusts/OEICs are often used for this purpose (its what I use for my children). Investment trusts are another.

Reaper

If you do not expect to use up the allowances yourself you could also open a Stocks & Shares ISA in your own name and put your investments in that, then simply gift the proceeds to you child when you are ready, or use the money yourself if you choose.

I went for Baille Gifford (though in my case I set it up in trust which is different to what you are planning to do).

dpc036

@jimjames Thanks, F&C are who i have the CTF with.

@reaper, thats a great point thank you, i wasn't aware that i could have an additional ISA in the form of shares, so this could be a good option.

My idea isn't to save to hand the cash over to her when she reaches a certain age, but to save so i can support her when i need to.

Do you know how the share ISAs compare to the baille gifford fund?

cloud_dog

dcp036, just be aware that if the BG or F&C are designated accounts then the ownership rules are much the same as the CTF, i.e. it is designated for a child (for legal and tax purposes).

I know reacher has done a lot of research in to the different options but my thoughts (just for simplicity) is that it you want to retain control of the money, its use, when the child recieves it, etc then the easiest option is to put it in to your own name, inside or outside of an ISA, inside if you have the spare capacity as mentioned.

Not sure which funds the BG invests in but I'm sure you would be able to invest in those funds directly within an ISA.

EDIT: A stocks and shares ISA (S&S ISA) is a wrapper. You would basically have an account with a provider (for example Hargreaves Lansdown), deposit your money (lump sum or monthly investing) and select the funds you want to invest in.

Just had a quick look at the BG site and it uses Investment Trusts as the vehicle. I.T.s can be thought of like Unit Trusts, i.e. they are collective funds/vehicles but they trade eactly like stocks. And, yes you could hold any of the listed BG ITs in an ISA (if you wished to).

If you decide to go the ISA route you may want to use Unit Truts / OIECs rather than ITs. More things to consider I'm affraid.

LadyWellian

cloud_dog are you sure about designation? I thought with a designated account the money remained legally the parent's (meaning it is theirs for tax purposes as well), while with a bare trust the money passes to the child at 18, much as with a CTF. I was under the impression that one of the benefits of the designated route was that the parent retained control of the money so that they could, for instance, dip into it if they really needed to, and decide when or whether to pay out the proceeds to the child.

to dpc/Paul, I just wanted to say that F&C also has a children's savings plan much the same as Baillie Gifford's, allowing investment into its range of investment trusts.

dpc036

Thanks everyone for your comments, its been very helpful.
At the moment the ISA route seems my best bet.

cloud_dog

LadyWellian wrote: »

cloud_dog are you sure about designation? I thought with a designated account the money remained legally the parent's (meaning it is theirs for tax purposes as well), while with a bare trust the money passes to the child at 18, much as with a CTF. I was under the impression that one of the benefits of the designated route was that the parent retained control of the money so that they could, for instance, dip into it if they really needed to, and decide when or whether to pay out the proceeds to the child.

You may be correct although it appears different providers describe slightly different rules.

The 'designated' account does leave legal ownership with the adult but it retains the £100 income/interest restriction if the money comes from the parants/guardian. Also, CGT appears to be assessed against the child and not the adult. It does state a designated account is a less formal arrangement to designate monies to a child at a future point in time (normally 18). Whereas, the Bare Trust is the formal arrangement.

I think it really comes down to if the OP is looking to create a pot of money that they can use to provide for the child (i.e. Uni fees etc) or a pot of money to give to the child.