Child Trust Fund Accounts - Sold Down The River?

foolsgold99

Hi,
When my first son was born in 2010. We got a £50 child trust fund voucher. Trying to be responsible parents we deposited the full amount (currently £1310.59) into the account believing that it was backed by the Government. We put it into the Yorkshire Building Society only to find a year later that the Government have scrapped the scheme and as a result the banks have lost interest in the trust fund accounts. The result being that my son's money is now trapped in that account until he is 18 earning a poor interest rate.

The fact that the banks have lost interest also means that rates on their accounts are all poor so there's not even much point in switching.

I think that having decided to scrap the scheme we should be allowed to withdraw the funds and close the accounts.

Another well thought out Government plan :mad:

sterlingstash

There are other alternatives you could switch to. F&C Global Smaller companies is where my little one's CTF is and has done pretty well over the last 4-5 years. Switch what you;ve already saved to the best of the available options (depending on your willingness to risk what is there - but remember you've got a good 15 years investment horizon) and then use alternative forms of account for any future savings which retain more control (eg have you got any unused ISA allowances between you?).

In the CTF you lose any access rights to it (child can;t have access to it until 18, after which it is all theirs to spend on whatever they fancy at the time), and as you have found, to any policy changes which come into force. With a cash based account and the minimial interest rates the money will be earning, I would think that keeping it in your own name, even if taxed, would be a better option in the long run. Consider Halifax's 6% regular saver (then move the resulting lump sum after a year - perhaps into a Lloyds 3% account in re: designation, tax free until the interest earned pa exceeds £200 (your and partners £100 allowance)

wriggly

You need to play the switching game to keep the interest rate up. Keep an eye on http://www.moneysavingexpert.com/savings/child-trust-fund-vouchers for the best rates.

Currently, you can switch to Furness BS and get 3.05%.

Otherwise, you could consider transferring to a shares-based CTF. Foreign & Colonial are often recommended as a good product, with up to 13 different funds available. And you don't have to have all the money in just one of those funds.

ses6jwg

Cash CTFs are a poor choice of investment over 18 years. They are the ONLY type of CTF which are GUARANTEED to be worth less than they are in 18 years time due to inflation.

Move it to a stakeholder or shares CTF.

My choice is family investments due to easy to use online access and bonus offerings.

foolsgold99

ses6jwg wrote: »

Cash CTFs are a poor choice of investment over 18 years. They are the ONLY type of CTF which are GUARANTEED to be worth less than they are in 18 years time due to inflation.

Move it to a stakeholder or shares CTF.

My choice is family investments due to easy to use online access and bonus offerings.

That sounds good but I have no idea about shares and stuff

ses6jwg

You dont need to, you just chuck it in a stakeholder plan and let it work itself and add to it every month by direct debit.

xylophone

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ChildBenefitandChildTrustFund/ChildTrustFund/WhentheChildTrustFundisupandrunning/DG_193644
https://www.fandc.com/new/IT/Default.aspx?id=78397
http://www.share.com/a/child-trust-funds-which-ctf-is-best.html

opinions4u

I don't understand why the Government didn't say "all CTFs now come under Junior ISA rules".

They have given the industry a chance to fleece millions of kids.

ses6jwg

opinions4u wrote: »

I don't understand why the Government didn't say "all CTFs now come under Junior ISA rules".

They have given the industry a chance to fleece millions of kids.

Surely it would cut down on the admin as well long term? Providers could just rebrand everthing Junior ISA and be done with it.

neet

Have you just got an F&C letter about fee increae - for those of us who never topped up the CTF - preferring bare trust - this amounts to a confiscation of the entire sum

sterlingstash wrote: »

There are other alternatives you could switch to. F&C Global Smaller companies is where my little one's CTF is and has done pretty well over the last 4-5 years. Switch what you;ve already saved to the best of the available options (depending on your willingness to risk what is there - but remember you've got a good 15 years investment horizon) and then use alternative forms of account for any future savings which retain more control (eg have you got any unused ISA allowances between you?).

In the CTF you lose any access rights to it (child can;t have access to it until 18, after which it is all theirs to spend on whatever they fancy at the time), and as you have found, to any policy changes which come into force. With a cash based account and the minimial interest rates the money will be earning, I would think that keeping it in your own name, even if taxed, would be a better option in the long run. Consider Halifax's 6% regular saver (then move the resulting lump sum after a year - perhaps into a Lloyds 3% account in re: designation, tax free until the interest earned pa exceeds £200 (your and partners £100 allowance)

foolsgold99

It's ridiculous. They really have fleeced us. No banks are interested in CTF now and our children's money is stuck in there. :mad: