Child Trust Fund - Foresters Financial

joshiesaunt

Hello, i have taken my eye off this trust fund over the years and wondered whether it is performing well. My child is due to have it at the end of 2023 when they reach 18. I have paid in £70 a month for the past 13 years (started a bit late when they were 1 years old) and it is invested in Invesco Perpetual Income 1 and Invesco Perpetual Smaller Companies Equity 1. I am concerned about the Uk economy going forward into Brexit and wonder if I need to transfer it to a non stocks and shares ISA to be on the safe side. Its value today is £19,626.39. Has it performed well? I have paid in roughly £11K so it seems like a good return?

I'm not financially savvy so any advice would be welcome.

xylophone

Your child is now approaching the fifteenth birthday?

If you are unhappy about the prospects for stocks and shares, you might consider a transfer to a cash JISA - Coventry BS currently offers 3.6%.

joshiesaunt

Thanks xylophone, they will be 14 at the end of this year. Is it worth leaving in this particular investment is what i'm trying to gauge I guess...

Reaper

From a rough and ready calculation I makes it equivalent to earning 9% pa so it's respectable. Whether it will will grow better, worse or the same nobody can really say.

bowlhead99

joshiesaunt wrote: »

Thanks xylophone, they will be 14 at the end of this year. Is it worth leaving in this particular investment is what i'm trying to gauge I guess...

The last 13 years has been very good for stock markets as there hasn't been a major 'crash' in values for over a decade and most of the £70s will have been invested since that time. So the return has been ok and you have a decent amount more than you put in.

Perhaps the child intends that they will eventually use the money in their late 20s for a deposit on a property, in which case it's fine to have it invested in equity funds for the next 15 years over which the value will go up and down but generally up. However, there are now only four years left until the child gets the money, and perhaps they will be using it to pay for university, a car, travel etc in less than five years from now.

One thing to consider is how you would feel if there was a stock market crash over the next couple of years and the funds dropped in value by 30 to 40%, but didn't really recover much before the child reached 18? If you keep paying in £70 a month you will be adding another £3.4k to the pot, but the eventual pot could still be less than it is today, if markets are not kind.

If you're indifferent whether the eventual pot at age 18 when your child takes control is £25k+ or perhaps only £15-20k, keep it where it is. From the child's perspective it is a decent wodge of money either way and they might prefer the gamble of having the potential of the higher amount by keeping it invested.

However, some people would think that they have already had a decent run and it might be appropriate to convert into a Junior ISA - perhaps putting at least half of it into a decent cash JISA like the one mentioned by xylophone, and then only up to half of it into a stocks and shares JISA, which has investment risk but potential of a better long-term return than cash. For the portion that remains invested rather than in cash, there are options available at a range of risk levels from the fund supermarkets.

joshiesaunt

Thank you for the replies. It will hopefully be used for university and we’ll need 15K at a minimum. I like the idea of taking out a chunk now into a JISA just so I know it’s safe but continuing the monthly investment for another 4-5 years.

xylophone

See

https://www.foresters.com/en-gb/products/articles/the-difference-between-ctf-and-jisa#gref

You can have a Cash and a Stocks and Shares Junior ISA
A child can have one Cash Junior ISA and one Stocks and Shares Junior ISA, however if your child has a Child Trust Fund they can only have one type of Child Trust Fund – either in cash or stocks and shares.


If you want the option you will need to transfer to JISA.

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

joshiesaunt

Well, a cautionary update tale.  I didn't act in the end and the value of the CTF has fallen to £17,000.  Now, i'm thinking to move it to a Junior ISA stocks and shares but a low risk one.  We have a further 4 years before the money will be needed to top up for university living costs so hoping it will recover a bit. 

AnotherJoe

Theres no promise a "lower" risk  one wont fall as much as a "higher risk  one. But if you need the money for uni I'd put it in a savinsg JISA if you can get that 3% rate above.

Otherwise if you want to gamble pick a global fund, not an income one or a UK one (which is what i think the smaller cos one is)

joshiesaunt

Thank you at AnotherJoe.  I'll start making some enquiries.

xylophone

NS and I is currently offering 3.25% on the JISA.