Child trust fund to ISA, is it worth it?

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
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beth3735beth3735 Forumite
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edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
I've just had a letter through today saying that I can transfer my daughters trust fund into a junior isa, she only has 4 years and 1 month left of the child trust fund before the money becomes hers. Currently she is on a shares trust fund and we have stopped paying Into it as she gets pocket money instead. The way it's sat right now she gained £88 last year in value due to shares, but previous years some have been poor increase.

Is it worth me transferring this money or just leave it sit for the next 4 years in stocks and shares and hope it doesn't drop in value in that time?

I also have 2 other children's accounts both in shares, 1 due to end in 5.5 yrs and one in 8.5 yrs. As these are longer investment times should I transfer these?

Thank you in advance

Replies

  • AlexlandAlexland Forumite
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    I don't know who the letter is from but please only go with a reputable Junior ISA provider. Junior ISAs mature into a normal ISA at 18 and would remain invested. Even if you switch to cash Junior ISA rates beat CTF rates.

    So I guess the question is would your children draw the money out at 18 or maybe leave it invested and maybe even contribute to the ISA themselves as young adults?

    On a DIY platform you can manage the risk down on a stocks and shares investment as the withdrawal date approaches by selecting low volatility funds and/or gradually selling units into the account cash balance.
  • Just received a letter from Foresters Financial (who took over Childrens Mutual) advising of my 'special feature' which allows them to unilaterally increase my direct debit each month from £25 to £25.79 to my child's CTF. I have advised them of my 'special feature' which allows me to cancel my direct debit to £0 and have instigated a transfer to a Junior ISA with Hargreaves Landsdown. It is this type of arrogance that gives the investment industry a bad name and should be highlighted for the scandal it is - if I agree to pay a sum each month to my child's savings, then only I will dictate how much that sum will be. Sorry, but their high handedness has really wound me up.
  • AlexlandAlexland Forumite
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    Still says on their website that they start from £10pm did you elect to increase your contribution with inflation when you signed up? If so this can be a good thing.
  • bowlhead99bowlhead99 Forumite
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    sacamp wrote: »
    Just received a letter from Foresters Financial (who took over Childrens Mutual) advising of my 'special feature' which allows them to unilaterally increase my direct debit each month from £25 to £25.79 to my child's CTF. I have advised them of my 'special feature' which allows me to cancel my direct debit to £0 and have instigated a transfer to a Junior ISA with Hargreaves Landsdown. It is this type of arrogance that gives the investment industry a bad name and should be highlighted for the scandal it is - if I agree to pay a sum each month to my child's savings, then only I will dictate how much that sum will be. Sorry, but their high handedness has really wound me up.
    One of the 'key features' of the Foresters CTF as published here (http://www.foresters.com/-/media/foresters/documents/pdfs/uk/child-trust-fund-keyfeatures.pdf?la=en-gb) is "Monthly contributions will increase automatically each year to keep pace with inflation (within allowable limits). You have the option to opt out or reduce your contributions at any time."

    That is not a 'scandal', it is a convenient feature for most savers. The government publishes inflation statistics every month. Say you start off contributing a tenner a month which is equivalent each week of putting aside enough money to buy a loaf of bread, litre of petrol and pint of milk. After a year, because of price rises and the cost of living going up, that level of contributions will no longer buy all of those items. After 16-18 years of contributions, due to inflation, the amount being put in each month will no longer even buy half of what it did in the first year, and so each new £x of contribution will be relatively worthless (compared to what they were at the start) if you don't increase them.

    To make it easy for you to ensure your contributions stay meaningful, the account feature (which you can cancel if you don't want to use it, although it's very sensible to use it) ensures that once a year you tick up the amount of your contributions. In your case it has gone up by a little over 3%, in line with the cost of living. But to imply they are being arrogant, or it's a scandal, or they're stealing from you and taking money off you that you didn't sanction, is ridiculous. The money is going into an account for your child. It's the same amount of money in real terms that it was last year. If you don't want to add the extra 79p, you can cancel it easily - that's why they wrote to you to remind you that you have the option to do that.

    They are not being 'high handed' by operating the standard account feature and letting you know that if you can't afford to put as much in this year as you did last year (in real terms, i.e. accounting for inflation) you can reduce it. You might find that other providers have different account features and different or better investment options, and generally Junior ISAs are more competitive products than CTFs because CTFs are no longer offered to newborn children so are becoming obsolete. So a move to a different provider could well be a good thing to do.

    Still, if you go to that different provider and continue to put in the same amount of money as you did in the old days (£25pm), even though things cost more to buy than they did in the old days (and can no longer be bought for £25pm), make sure you recognise that you are investing less for your child (in real terms) than you were doing before.
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