Changing CTF advice needed

Jvj24601

I received our annual update from my son's child trust fund, which is done through Forester Life.

I saw that the savings plan was Aberdeen UK Tracker so I googled to see what it was. I ended up seeing a lot of information about the fact that we are being charged a management fee of 1.5% p/a that is three times the rate we could get elsewhere.

I also saw that the child trust fund is no longer in operation and that junior ISAs are the thing these days. The reason we didn't know all this is that we just set it up, created a standing order and have left it ever since. So, it's now time for us to review the situation.

Please does anyone have any advice on the following issues. For each of these issues our main concern is security with a a bit of growth. Basically, we don't want to get five years into the future and the thing we have chosen goes belly-up and we lose all the kids' money.

- Should we move to an ISA?
- Should we do this through our existing company, Forrester Life?
- Are some providers riskier than others, as companies, not the actual plan?
- Will choosing a company with a 0.5% management fee necessarily be riskier than choosing a company with a 1.5% management fee?
- Are all ISAs the same?

Any help would be greatly appreciated!

Keep_pedalling

How old is your son?

louloubelle79

I received advice on here recently about same thing. Lots of JISAs out there to choose from, I went for a S&S JISA with Vanguard as they have 10 and 8 years to mature until there 18 so hoping get better returns.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa

Jvj24601

Thank you louloubelle79! My boys are 11 and almost 13.

xylophone

If you wish to transfer to a JISA, you need to contact the provider to whom you wish to transfer and check that the transfer in will be permitted.

https://www.gov.uk/junior-individual-savings-accounts

You might look at Vanguard as above or perhaps Charles Stanley Direct.

http://monevator.com/using-vanguard-lifestrategy-funds-life/

https://www.telegraph.co.uk/money/special-reports/top-junior-isa-funds-chosen-experts/

https://www.charles-stanley-direct.co.uk/News_Features_Research/best-performing-junior-isa-funds


Cash rates here

http://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

louloubelle79

Yes vanguard wouldn!!!8217;t allow CTF to transfer in so had to change to JISA with old provider then transfer to Vanguard

TARDIS

1.5% annual charge was fairly standard for CTFs.
Higher charges do not mean a better product. In fact many argue the complete opposite.
Charges are also not related to risk, although potential returns may be.

Jvj24601

TARDIS wrote: »

Charges are also not related to risk, although potential returns may be.

Thank you for your reply! Do you mean that the higher the potential return, the higher the risk? But this is unrelated to the charges?

Brynsam

Think you may not have seen this: https://www.moneysavingexpert.com/savings/child-trust-fund-vouchers

Reaper

Jvj24601 wrote: »

Do you mean that the higher the potential return, the higher the risk? But this is unrelated to the charges?

As a rule of thumb that is correct. For example you could place money in a standard bank savings account (almost) risk free but struggle to keep up with inflation, or invest it in the stock market and expect to get much better returns in the long run but have to weather regular market crashes.

Charges are irrelevant except in so much as they reduce performance.

ValiantSon

TARDIS wrote: »

1.5% annual charge was fairly standard for CTFs.
Higher charges do not mean a better product. In fact many argue the complete opposite.
Charges are also not related to risk, although potential returns may be.

If we followed that to its logical conclusion then the higher the charge the better the fund. This is clearly nonsense too. The point that low charges don't necessarily equal better investments is valid, but the reverse is not.

The higher the charges the better the fund has to perform to keep pace with comparable, but cheaper, rivals. There are some expensive managed funds that have delivered excellent returns that wholly justify the cost premium (thus far), but there's also a lot of dross where the fund charges are an additional drag on returns.

Costs are a valid factor to consider when choosing investments, although they should not be the only one.