Lost Money due to Lifestyling being removed from my son’s Child Trust Fund

fluffyedgar

My son’s child trust fund is due to mature in May 2021. I was under the impression his fund had been lifestyled (moved into safer funds and cash). However, I have logged on this morning and can see that it is still invested in the stock market meaning I have lost around £700 as a result of the declining stock market due to COVID. I was written to in February 2016 by One Family to advise my son’s fund was being lifestyled. I have now competed more research and can see that the government removed the requirement to ‘lifestyle’ in 2017. However I was not written to by my Child Trust Fund provider to notify me of this change (I keep all paperwork!). I have written to One Family to ask for proof that I was notified.  Has anyone else experienced this? 

dunstonh

I have lost around £700 as a result of the declining stock market due to COVID.

To be honest, I would have thought lifestyling during the CV falls would have reduced returns as most investors are now back up above where they were before the downturn.   If you sold units at a low point, they would not have recovered.

If you are badly invested, such as 100% in UK equity, then that is a different matter.

 I was written to in February 2016 by One Family to advise my son’s fund was being lifestyled. I have now competed more research and can see that the government removed the requirement to ‘lifestyle’ in 2017. However I was not written to by my Child Trust Fund provider to notify me of this change (I keep all paperwork!). 

Just because the requirement went away does not mean it went away for you.  Providers were free to keep it in place.

eskbanker

dunstonh said:

 I was written to in February 2016 by One Family to advise my son’s fund was being lifestyled. I have now competed more research and can see that the government removed the requirement to ‘lifestyle’ in 2017. However I was not written to by my Child Trust Fund provider to notify me of this change (I keep all paperwork!). 

Just because the requirement went away does not mean it went away for you.  Providers were free to keep it in place.

https://www.onefamily.com/lifestyling/ confirms that One Family did choose to react to the change - the page is undated but its underlying metadata suggests that it was published in July 2018.

If OP was to try to claim that they'd lost value by virtue of lack of written notification from One Family and the provider accepted liability, the loss (if any) would presumably need to be quantified as the variance between July 2018 and now, comparing this with a notional position had they shifted to cash then....

fluffyedgar

I found the same link as eskbanker, so it looks like they did drop lifestyling which does mean the recent COVID crash has impacted his fund, when I thought it was in a safer place because of the last letter I received in February 2016 saying the fund would be lifestyled from his 15th birthday.

My son turned 15 on 22/05/17. I’m not sure at what point they changed their policy but at this point the policy was worth circa £3.5k, plus I have paid in around £800 since this time. At today’s value it’s now only worth £3.8k, so I guess I have lost around £500 due to the change in investment approach. I know we are only talking small figures in investment terms, but this is a teenagers money! My earlier £700 loss was based on the last statement value as there was investment growth after his 15th birthday, but if I rerun the figures under a lifestyling approach from 2017 the lost would probably have been closer to £500...

The fund they are investing in is called FI Child Trust Fund, I have no idea about funds! 

Surely the provider should have notified me they were dropping lifestyling and if it turns out I was adversely affected, would I have cause for complaint? Or is that fund likely to come back before he turns 18 in May 2021?

Thanks for your help! 

eskbanker

fluffyedgar said:

My earlier £700 loss was based on the last statement value as there was investment growth after his 15th birthday

On their site they claim to send out statements "just before the child’s 5th, 11th, 16th, 17th and 18th birthdays", so (if sent/received/viewed) don't these indicate what was going on?  It does seem odd that they'd commit in writing that they'd do the lifestyling but then to fail to advise a change of approach via the same channels, but I'd expect them to argue that statements issued in 2018, 2019 and 2020 would have conveyed enough information to act on - if they failed to issue these as well then you'd certainly seem to have cause for complaint....

fluffyedgar

They did send statements, which yes I did receive but I just assumed it was lifestyled! 

dunstonh

I found the same link as eskbanker, so it looks like they did drop lifestyling which does mean the recent COVID crash has impacted his fund

Why do you think that is the case?  (not the fact they dropped lifestyling but that Covid has impacted the fund?)

The Covid falls happened between around 24th Feb and 25th March.   Since then the recovery kicked in and most people are back higher than than their January values.  And those are higher than their 2019 values.    

It is only portfolios that are heavy in UK equity that have suffered.

 I’m not sure at what point they changed their policy but at this point the policy was worth circa £3.5k, plus I have paid in around £800 since this time. At today’s value it’s now only worth £3.8k, so I guess I have lost around £500 due to the change in investment approach. 

Is it a unit linked fund or a with profits fund?  If WP, then the amount you pay in is not necessarily reflected in the value. i.e. if there is a basic sum assured to which the bonuses are added to.

They did send statements, which yes I did receive but I just assumed it was lifestyled! 

And if you re-read those statements, does it say anything about lifestyling being removed?

I cannot imagine a provider would remove lifestyling without informing you.  However, it may not have been a specific letter by itself but contained within the statement.

eskbanker

dunstonh said:

I found the same link as eskbanker, so it looks like they did drop lifestyling which does mean the recent COVID crash has impacted his fund

Why do you think that is the case?  (not the fact they dropped lifestyling but that Covid has impacted the fund?)

The Covid falls happened between around 24th Feb and 25th March.   Since then the recovery kicked in and most people are back higher than than their January values.  And those are higher than their 2019 values.    

It is only portfolios that are heavy in UK equity that have suffered.

https://www.onefamily.com/assets/consumer/downloads/fund-fact-sheets/family-investments-child-trust-fund-fact-sheet.pdf paints a grim picture if that's the one referred to as "FI Child Trust Fund" - about 50% UK equities and still about 10-15% off its pre-Covid peak in June 2020 (and seems fairly flat since then from published pricing elsewhere).  Having said that, its current value isn't dissimilar to that in May 2017 so if the CTF had been moved to cash at that point as originally anticipated, it wouldn't be significantly higher now if it hadn't remained invested....

dunstonh

eskbanker said:

dunstonh said:

I found the same link as eskbanker, so it looks like they did drop lifestyling which does mean the recent COVID crash has impacted his fund

Why do you think that is the case?  (not the fact they dropped lifestyling but that Covid has impacted the fund?)

The Covid falls happened between around 24th Feb and 25th March.   Since then the recovery kicked in and most people are back higher than than their January values.  And those are higher than their 2019 values.    

It is only portfolios that are heavy in UK equity that have suffered.

https://www.onefamily.com/assets/consumer/downloads/fund-fact-sheets/family-investments-child-trust-fund-fact-sheet.pdf paints a grim picture if that's the one referred to as "FI Child Trust Fund" - about 50% UK equities and still about 10-15% off its pre-Covid peak in June 2020 (and seems fairly flat since then from published pricing elsewhere).  Having said that, its current value isn't dissimilar to that in May 2017 so if the CTF had been moved to cash at that point as originally anticipated, it wouldn't be significantly higher now if it hadn't remained invested....

50% UK equities - ouch.

That is a regular contribution chart over the last 10 years.   I put in 20pm just to generate the line.  Amount can be ignored.
The current value is back to where it was in February 2020.
If the CTF was maturing in May 2021, then the risk reduction would have started in May 2016.   It is impossible to plot where it would have been has risk been reduced.   However, below I have shown VLS20 through to 80 since 2016 with regular contributions.


Using VLS is unfair as the Family Child Trust fund is rubbish.   However, the point is to look at the scale of difference when you reduce equity content in that period and VLS is a good way to see the differences.
I suspect that had lifetyling started to be applied from 2016,  the drop in 2020 would be a lot less but the growth from 2016 to 2019 would have been a lot less too and it is probably broadly in the similar position to what it would have been had lifestyling been in place.

I also read elsewhere that letters were sent out at the time it was removed and people were given their options (either keep it without lifestyling or transfer it.

fluffyedgar

The statements make no reference to lifestyling being removed, even the one directly after the change. The fund dropped from 1.169 in February to 0.9531 today, so it has clearly not recovered. I guess I will have to wait to see what they say in response to my email asking for a copy of the lettter notifying me of the change. I guess then it will be a case of working out what the value would have been if lifestyling had been applied. It’s disappointing, as having seen the higher value prior to COVID, and thinking it was protected by lifestyling to then discover it wasn’t... I find it difficult to understand why they would let a child’s fund be so adversely affected. At worst it looks like he will get back what I paid in, which is a tad disappointing!...... but thanks both for your comments! 

fluffyedgar

dunstonh said:

eskbanker said:

dunstonh said:

I found the same link as eskbanker, so it looks like they did drop lifestyling which does mean the recent COVID crash has impacted his fund

Why do you think that is the case?  (not the fact they dropped lifestyling but that Covid has impacted the fund?)

The Covid falls happened between around 24th Feb and 25th March.   Since then the recovery kicked in and most people are back higher than than their January values.  And those are higher than their 2019 values.    

It is only portfolios that are heavy in UK equity that have suffered.

https://www.onefamily.com/assets/consumer/downloads/fund-fact-sheets/family-investments-child-trust-fund-fact-sheet.pdf paints a grim picture if that's the one referred to as "FI Child Trust Fund" - about 50% UK equities and still about 10-15% off its pre-Covid peak in June 2020 (and seems fairly flat since then from published pricing elsewhere).  Having said that, its current value isn't dissimilar to that in May 2017 so if the CTF had been moved to cash at that point as originally anticipated, it wouldn't be significantly higher now if it hadn't remained invested....

50% UK equities - ouch.

That is a regular contribution chart over the last 10 years.   I put in 20pm just to generate the line.  Amount can be ignored.
The current value is back to where it was in February 2020.
If the CTF was maturing in May 2021, then the risk reduction would have started in May 2016.   It is impossible to plot where it would have been has risk been reduced.   However, below I have shown VLS20 through to 80 since 2016 with regular contributions.


Using VLS is unfair as the Family Child Trust fund is rubbish.   However, the point is to look at the scale of difference when you reduce equity content in that period and VLS is a good way to see the differences.
I suspect that had lifetyling started to be applied from 2016,  the drop in 2020 would be a lot less but the growth from 2016 to 2019 would have been a lot less too and it is probably broadly in the similar position to what it would have been had lifestyling been in place.

I also read elsewhere that letters were sent out at the time it was removed and people were given their options (either keep it without lifestyling or transfer it.

Wow thanks! Yes I think I’m now learning the CTF is rubbish! I also just found this article, looks like there will be many others with the same issue!
https://www.moneymarketing.co.uk/opinion/our-17-year-olds-are-at-risk-as-the-markets-plummet/