Should I transfer CTF to JISA?

Hi, I'm looking for some advice in relation to Child Trust Funds. I took out a Stocks & Shares Child Trust Fund in late 2006 when the government were issuing CTF vouchers. I've put a small amount into it each month since opening. In total I've put roughly £5,400 into the CTF which is currently run by Foresters Finance  In June 2019 it was worth £6,500. However, like most savings its been impacted by Covid and by June 2020, despite having continued to pay into it each month, its value had reduced to £5,600. Despite continuing to put a small amount in each month its value seems to be continuing to reduce with current value now sitting at £5,450 and therefore coming very close now to me actually losing some of the money I've put in rather seeing any level of return. The account has 3yrs left to run before my child turns 18 and I've always been advised to hold my nerve when it comes to stocks and shares accounts with the idea being that things will eventually get better. However, the fund has taken a huge hit and I'm really worried it could be worth very little very soon. Am I best riding it out over the next 3yrs or should I cut my losses and move it into a cash Junior ISA? I'm so confused! Any advice welcomed and keen to know if anyone else in a similar situation? 

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  • Sorry i don't have any advice, i literally just came on here to post the exact same thing.  My child's account has four years left to run and has dropped from £7601 in October 2019 to £6719 October 2020.  I'm too am worried things won't pick up enough over the next four years and i'm seriously considering changing to a Junior ISA.  At the moment it's worth about the same as it would have been if it had been in a Junior ISA all these years so it hasn't lost anything in a way but i'd hate for it to eventually be worth less than had been paid in which i'm worried could be the case.  
  • Alexland
    Alexland Posts: 9,653
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    edited 30 October 2020 at 1:30PM
    MagsCee said:
    The account has 3yrs left to run before my child turns 18 and I've always been advised to hold my nerve when it comes to stocks and shares accounts with the idea being that things will eventually get better.
    That direction is fine when you have confidence in the investments, provider and long enough ahead to ride out the ups and downs. The problem is that many friendly societies have poor investment choices (suffering concentration in UK shares that have so-far failed to recover as well as diversified global markets), high charges (eroding returns each year) and you only have a few years until age 18. Generally I would not want to have held or continue to hold investments with a friendly society.
    In terms of asset allocation then if the money will be withdrawn to be spent at 18 then the derisking into less volatile assets should have started at least 5 years in advance to give more certainty of outcome. There is an argument that Cash JISA rates are so good that it's not really worth running a S&S JISA/CTF at a low to medium level of risk as the return is likely to be comparable so it's probably best to pick the first moment when the markets are still high in the circa 5-7 years leading up to withdrawal and making the switch to cash.
    Still if the child is not going to spend the money at 18 and might leave it invested for a further 10 years for example to support a house purchase at age 28 then it's OK to leave it invested for longer and ride out the storms. However if you/they were to leave it invested in S&S for longer then you might want to move it to another provider with a better proposition but that would mean time out of the market which might move either way (and things are volatile at the moment) while the transfer happens.
    Alex
  • Thanks Alex. It's all a bit mind boggling but the plan is to move the money when he's 18 into a LISA and continue to save toward a house deposit. Am I right in understanding from what you're saying that ideally I should have moved it into a Cash JISA a couple of years ago and should probably do that ASAP before things potentially get worse?
    Warm regards
    Mags
  • Alexland
    Alexland Posts: 9,653
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    edited 30 October 2020 at 1:58PM
    MagsCee said:
    Thanks Alex. It's all a bit mind boggling but the plan is to move the money when he's 18 into a LISA and continue to save toward a house deposit. Am I right in understanding from what you're saying that ideally I should have moved it into a Cash JISA a couple of years ago and should probably do that ASAP before things potentially get worse?
    In which case if the money will not be spent at age 18 (just transferred between different types of accounts and providers) the value of the CTF at age 18 doesn't matter as much (although the 25% bonus is based on how much is transferred into the LISA) because of course you can get S&S LISAs and continue to invest the money. Your child may also want to use a S&S ISA to continue to invest any money above the £4k that can be transferred into the LISA each tax year. Now the LISA would need to be open for at least 12 months before it could be used for a qualifying property purchase so the real question is how long it is likely to be invested before it is needed to be spent (and derisking based on 5-7 years leading up to that target date) and if you want to continue with the friendly society's investment approach and charges for much longer or if you are willing to risk time out of the market to transfer elsewhere.
    Sorry not authorised to give you advice just chat and things to think about.
    Alex
  • Hi Alex, I'd envisage it being invested in the LISA for 8-12yrs. What I'm uncertain about is whether it's best to pull the money out of S&S now and pop into Cash ISA to obtain some stability with a view to revisiting S&S again in 3yrs time, or should I ride it out? 
  • Alexland
    Alexland Posts: 9,653
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    edited 30 October 2020 at 2:44PM
    MagsCee said:
    Hi Alex, I'd envisage it being invested in the LISA for 8-12yrs. What I'm uncertain about is whether it's best to pull the money out of S&S now and pop into Cash ISA to obtain some stability with a view to revisiting S&S again in 3yrs time, or should I ride it out? 
    In which case if you include the 3 years it would still be in a CTF/JISA we are talking about the money not being needed for 11-15 years so thankfully the account valuation at age 18 doesn't matter if they continue to invest it using S&S ISA and LISA wrappers (other than for the calculation of the 25% LISA bonus after the up to £4k lump sum transfers each tax year).
    The real question is if you want to continue investing with Forester's friendly society (it looks like they are mostly invested in bonds now having sold all equities near the bottom in mid March 2020 - even professionals get it completely wrong despite your intentions to remain invested) or cut your losses and move to a more diversified global investment (which have mostly already recovered excluding recent US election/covid related volatility) or having been burnt just have the certainty of preferential cash rates for a few years while the child still has access to them.
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