Lifetime ISA and what to do with a CTF

swanny65

My daughter is 17 this month and wants to start saving with the view it will eventually be a deposit for a house in 6+ years time. She earns about £400 a month from 3 PT jobs while at college.

Lifetime ISA looks best for here as the bonus will be bigger if she saves more than £12K but she cant open one until next year.

What should she do now - she has a CTF which we are paying £25 pcm into until she is 18 (c£11K value) so could save into there but with an element of risk.

Which also begs the question what should she do with the CTF at 18, or now if wiser to act now?

swanny65

Bumping please

Mistermeaner

My thoughts ;

Transfer the ctf to jisa , lots of providers do this i used nationwide for my eldest

The jisa then becomes an isa when she hits 18

Save that 25 a month for now and her other earnings in a cash account

Open a help to buy isa at age 18 and pay into it as much as she can (up to 4k per anjum) , including from your 25pounds that have saved up and from her then isa

For each 4k you pay in the government put another 1

But a house !

xylophone

Is this a cash CTF? Is she getting the best rate?

She has time to transfer to JISA and get 3.6% from Coventry BS.

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

She can open a LISA at age 18 and transfer in an appropriate amount from the JISA.

Malthusian

If risk is a problem she should be transferring the existing CTF (assuming it's equity-based as you said it involves risk) to a cash Junior ISA now, e.g. as per xylophone. The risk isn't going to change the moment she becomes old enough to buy booze. But if it's going to form part of the deposit fund in six years' time, there is a good chance she would lose money by cashing it in now.

The right thing to do with the CTF is probably the right thing to do with her ongoing savings.

Bear in mind that stockmarkets can make and have made a loss over a 6 year period; 6 years was about how long it took for people who invested at the top of the market in 2007 to permanently beat cash. However only a small fraction of people invest at the top of the market. And she is making ongoing contributions so if the market does crash she will be buying shares at the bottom.

If she saves for her house deposit in cash she will be running to stand still; she will have to save extra money to compensate for house price inflation. Risk-based investments have at least some kind of vague correlation with house prices (although it isn't going to be exact).

Reaper

Mistermeaner wrote: »

Transfer the ctf to jisa , lots of providers do this i used nationwide for my eldest

The jisa then becomes an isa when she hits 18

Amazingly the government has still not clarified what happens to CTFs when the child reaches 18, which will start happening from 1st September 2020.

However it seems likely the child will be able to keep it running and continue to add money to it just like an ISA (parents won't be able to add to it any more though) and presumably it will remain tax free, so I don't think there is any need to switch it to a JISA - unless of course you find one where the charges are lower and/or the options greater.

Here is Foresters view on the subject

What are my child’s options?
The Government have not yet finalised the details. However we do know that your child has the option to withdraw the money, continue to save or a mixture of the two.

swanny65

xylophone wrote: »

Is this a cash CTF? Is she getting the best rate?

She has time to transfer to JISA and get 3.6% from Coventry BS.

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

She can open a LISA at age 18 and transfer in an appropriate amount from the JISA.

No it is shares with F&C now BMO, in a range of funds.....

Malthusian

Reaper wrote: »

However it seems likely the child will be able to keep it running and continue to add money to it just like an ISA (parents won't be able to add to it any more though)

You can just give your child the money for them to put in their grown up ISA.

Reaper

swanny65 wrote: »

No it is shares with F&C now BMO, in a range of funds.....

The BMO/F&C JISA and CTF are identical. Same charges and same range of funds so I don't see a need to switch over unless something unexpected happens when the government finally clarifies the rules.