F&C Childrens Investment Plans - New Charges

snowcat53

Thanks for posting the links. I should have checked the postbox this morning before posting- letter now arrived. However I dont think I will be moving out as the charge is low on current 14k CTF valuation. The Stakeholder seems to have higher charges (says 0.7%, but total i think is 1.5% - the cap) as well as only the 1 fund choice. The F&C IT and the Global smaller co fund are good performers.

EDIT - actually i'm now confused by the charges on the 2 types of account. They are nowhere compared like for like in the Key features doc. This is poor in terms of transparency

Biggles

jimjames wrote: »

The new charge for lump sums seems particularly harsh. Previously the cost was 0.2% of the sum invested. For the £100 minimum that will now be 8%.

Well, it looks like £12+V=£15.00 for each lump sum, ie 15%.

It seems to be the sale of shares that permits a lower rate of £8+V, if the order's placed online. But I can't place an order online, as I have the children's parents as joint trustees and that seems to mean that my online account is read-only.

And the minimum monthly DD is £25; now that I've set up and funded the CIPs, £300 a year is at the top range of what I was planning to contribute on a regular basis, I would much rather fund with lump sums on birthdays & xmas according to my situation at that time.

phil235

This change is so outrageous that I hardly know where to start!
The F&C letter dated 29 May 2012, which explained the appointment of a new administrator and summarised the key changes, explicitly states under “What is not changing?”, “For example, there are no changes to the permitted investments or the level of the charges on your account.”

The booklet of updated terms & conditions, sent with a letter dated August 2012, includes a section headed “Payment of charges”. It says, “Transaction charges, including all third party dealing, brokerage and investment administration charges, will be deducted from the account when the transaction is processed.” "Plan charges (where applicable) will be applied to the account....” No indication here that there would be any changes in current charges.

The letter dated 5 February 2013 is a masterpiece of sly weasel-wording. Under “What is happening?” the impression is given that many investors will benefit from this change: Big deal! No more dealing charges!! Oh, and by the way, there’ll just be a little annual account charge - nothing to worry about there. Then “What does this mean to you?” relates the “amount of charge” (omitting the word ‘annual’) to the overall value of the account, rather than to the amount invested annually.

The table below shows a like-with-like comparison of annual charges against annual investments:
Headings:
(A)Monthly investment, (B)Annual investment, (C)Current annual charges @ 0.2%, (D)Future annual charge incl 20% VAT, (E)Future annual charge %, (F)% increase in charges.
(Can't tabulate it properly - hope this is understandable)

(A) (B) (C) (D) (E) (F)
25 300 0.60 30.00 10.00% 4,900%
40 480 0.96 30.00 6.25% 3,025%
50 600 1.20 30.00 5.00% 2,400%
75 900 1.80 30.00 3.33% 1,567%
100 1200 2.40 30.00 2.50% 1,150%
150 1800 3.60 30.00 1.67% 733%
200 2400 4.80 30.00 1.25% 525%
300 3600 7.20 30.00 0.83% 317%
500 6000 12.00 30.00 0.50% 150%
750 9000 18.00 30.00 0.33% 67%
1000 12000 24.00 30.00 0.25% 25%
1250 15000 30.00 30.00 0.20% 0%
1500 18000 36.00 30.00 0.17% -17%
2000 24000 48.00 30.00 0.13% -38%

Note: Stamp duty on purchases of 0.5% ignored

It’s clear that this approach is grossly discriminatory against what must be the vast majority of savers who can only afford a modest monthly contribution. For those starting from scratch to save monthly, the plan is effectively strangled from birth. Those of us saving for two (or more) children or grandchildren are hit with the flat fee for each account, even though the accounts may be identical.

F&C could in my opinion do a great deal more to reduce their administrative costs. The amount of stuff we get mailed is ridiculous - in my case two of everything, in separate envelopes. Even this letter announcing the new charges came separately, only a matter of days after from the last half-yearly statement and jolly little Newsletter, plus top-up forms and assorted other marketing bumf. Why not send everything online, but allow investors to opt-in for hard copy through the post (for an additional fee)?

In summary, this whole change stinks. F&C need to look at the morality of this, and the scope for reputational damage, and think again - quickly.

benalder284

I agree the wording of their letter is appalling but I doubt F&C really care. Their actions are clear - they want rid of small accounts. I am happy to oblige and have filled in my sale of shares form within the last hour and will invest the proceeds with other IT companies still offering childrens savings plans with no annual fee.

jem16

benalder284 wrote: »

will invest the proceeds with other IT companies still offering childrens savings plans with no annual fee.

You might find, as RDR kicks in and with the Platform Review following on, that all companies will eventually bring in an explicit charge.

webmasterpolo

jem16 wrote: »

You might find, as RDR kicks in and with the Platform Review following on, that all companies will eventually bring in an explicit charge.

Exactly, RDR caused this, the regulator (FSA) launched RDR. If you want to blame someone blame the FSA.

Or just understand how and why the changes happened.

Obviously F&C need paying for what they do, they aren't a charity.
Obviously you the customer pay them as you have always done.
The difference is merely that you can see how much you pay when before it was sliced off as a % each year as part of the fund annual charges (which you might now see fall) which no one ever really saw in black and white.

-Web

jimjames

webmasterpolo wrote: »

Exactly, RDR caused this, the regulator (FSA) launched RDR. If you want to blame someone blame the FSA.

Or just understand how and why the changes happened.
Web

Although by making it a percentage it meant that small savers were far more protected. It is a shame that the burden of increased fees is disproportionately hitting small savers.

I've repeatedly recommended F&C on here as an excellent way to build up a good fund for your kids. Sadly that is no longer the case.

Effectively even if the other IT platforms bring in similar charges it means I will merge them into a single plan to make it more cost effective so I'm not running Aberdeen and F&C plans for example. Or even just save inside a S&S ISA so again only a single platform fee is incurred.

atush

I have always recommended them too, and probably won't now (at least for specialised kids accts).

but I have a savings plan with F&C, in 5 figures. And they have not sent me a letter about any changes in charges. So this may be just for the children's plans? My plan is unwrapped.

sterlingstash

Another dissapponted F&C customer who up until yesterday had watched the Global Smaller Cos CTF doing really well. Anyone got any recommendations on where to go next? Perhaps crystallising the recent gains may turn out to be a good move, and F&C has done us a favour...

Biggles

phil235 wrote: »

(A)Monthly investment, (B)Annual investment, (C)Current annual charges @ 0.2%, (D)Future annual charge incl 20% VAT, (E)Future annual charge %, (F)% increase in charges.
(Can't tabulate it properly - hope this is understandable)

(A) (B) (C) (D) (E) (F)
25 300 0.60 30.00 10.00% 4,900%

Whilst agreeing with the sentiments, I have some quarrel with the maths: (E), future annual charge, will be a much lower % than that, as it will be a % of the total in the account, not the annual amount added.