Child Trust Fund - avoiding initial charges in shares account?

pobfan9

Hello,

First time poster here having seen so much great advice on this site.

I am looking at how to make best use of the Child Trust Fund we have for our son (born before Junior ISAs). We currently have a non-stakeholder fund, investing in one particular fund. However, we are paying 5% initial charges on purchasing the fund, and 1.5% annual management fees with Childrens Mutual. These figures seem standard, but is there anyone offering access to Invesco Perpetual Income fund anywhere without the 5% charge?

Have had a look around Selftrade, but some online reviewers seem to rate their offering poorly?

Would appreciate any help - normally look to Hargreaves Lansdowne for help, but they don't offer CTFs?!

Thanks
Pobfan

snowcat53

Have a look at F&C (Foreign & Colonial), which I and I know others here use. They have a 'shares' (non stakeholder ) CTF account which has very low charges and a range of funds. Not AFAIK Invesco though if you are insisting on that, but I like the F&C Investment Trust and Global smaller companies

http://www.my-ctf.co.uk/Default.aspx?id=92734

pobfan9

Thanks for your help, I will take a look!

Pobfan

jimjames

Depends on your situation and earnings etc but if you are a basic rate taxpayer you may be better off buying outside the CTF so you can get the units without the initial charge.

By via HL.co.uk and you'll get full units for your money. If you're not already using a S&S ISA then doing it via that would also mean you don't pay extra tax even if you are higher rate taxpayer.

pobfan9

Hi JJ

Ugh I wish I could see the obvious answer sometimes... your idea is a good one of course as I am using up the cash only portion of an ISA right now. I wish I were more astute like you guys!

Anyway, I will def take a look at Vantage ISA and the Invesco fund to see what their charges are on that.

I am obviously investing less than the max allowable in the S and S ISA portion into the CTF so that makes more sense. Now the question would be what to do with the £3000 or so that's in the CTF... convert it into a savings CTF??

Thank you

Pobfan

bowlhead99

pobfan9 wrote: »

Hi JJ
I am obviously investing less than the max allowable in the S and S ISA portion into the CTF so that makes more sense.

If you have spare capacity within your own 'grown-up' ISA limits it would make sense to use them up unless the CTF wrapper has a great investment opportunity that you can't access without the child's help.

I think it's unlikely there will be many/any unmissable S&S-type CTF exclusive deals going forward, because the relatively small amount of money currently in them can't increase massively because everyone being born now is on the junior ISA. Whereas the adult ISA market is much bigger and has much more growth potential going forward and therefore should generally be more competitive for the same underlying investment.

The other advantage of using your own investment limits instead of the child's is that you have much more flexibility in when you cash out and give it to the child. You could access some of it at age 12, 16, 18, 21, 25 etc etc.

Now the question would be what to do with the £3000 or so that's in the CTF... convert it into a savings CTF??

Assuming you have already paid that high initial charge to get that £3000 invested, you're now just paying an annual management fee on its capital value without the obligation to put more in? And the annual charge is not hugely uncompetitive against other actively managed funds (not to say it's the very best option, but it's not awful).

So I don't get why you would suddenly decide to opt out of investing altogether on this 3k and just 'save' it in a cash product which won't beat inflation. Presumably your timescale is long enough for it to still stay invested rather than 'saved', because you're looking at putting new money into investment funds. It doesn't hurt to be diversified across your investment choices so I would just keep it where it is and let it grow, or if they won't let you, move it to a different investment CTF of your choice.

There is no right answer but I suspect moving it into a low growth cash or capital preservation CTF is not a great choice for the long long term if you have an appetite for risk.