the child trust fund - over 2 years I've lost money. invest more? change provider?

lkmc01

My son is now 2 years old. He will be 3 in September this year. We opened him the trust fund in November 2005 with family investments

http://www.familyinvestments.co.uk/

The money we have had from the government is 2 x £250 so £500.

Since the account was opened we have added £470 ourselves. Not alot I know but we are also trying to save for a house deposit.

So the total money input into his trust fund from ourselves and the government is £970.

Today his account is as follows -

Total units held at 23/06/2008 422.8047 Price per unit held at 23/06/2008 2.1910 Value (unit × price) £926.37 Total value at 23/06/2008 £926.37


so this is a loss..... so far. I don't know anyone else with kids to talk to about this.


Has other peoples trust funds for their children been rising in interest?


Do people think this will still rise? if not should I avoid adding any more to it and just put any money into his save4it account at 5.55% interest instead?

what are you/ have you done with the trust fund account?

As its a low unit price at the monent do you now think that I should invest more to get more units for my money and so stay with family investments?

What providers do other people use - and what are your opinions of them?

Shall I change provides if you think that is a poor performance?

Has anyone heard anything good/bad about family investments?

not sure what to do as its an 18 year account.

Its a stakeholder account.

the follows details are from the family investments web site

'The Family Investments CTF is a stakeholder Child Trust Fund that invests in shares. As a stakeholder account, it conforms to the government's guidelines for this kind of account, such as:

• Capped charges – Our annual management charge is capped at 1.5% of the value of the account
• Risk management – From your child's 13th birthday our fund managers will start to move the investment from shares to lower risk investments, helping to protect your child's savings towards the end of the investment period

We also offer:

• Over 30 years experience in providing investments for families - We're also currently the leading Child Trust Fund provider with over 500,000 accounts
• Expert fund management – Your savings will be managed by New Star, one of the UK's leading asset management companies
• Top-up your account any time – You, or your family or friends, can add to the account at any point by setting up a Direct Debit online through this website. You can also do this by calling us or sending us a cheque. '

http://www.familyinvestments.co.uk/keyfeat.pdf

I know that alot can change in 18 years, but the account is not even going in the right direction now.

luckylizard

as you may have noticed, global stock markets are down about 10-15% over the past year alone. so it's no surprise your fund is down. in fact, you've done quite well by comparison. long-term, a stocks/shares CTF should out-perform one just held in cash, so i wouldn't panic yet.

.

wriggly

Over 18 years, shares in a stakeholder account would be expected to be more volatile than cash savings (more ups and downs), however, they would also be expected to provide a higher return over the 18 years. I would leave the money in shares and possibly add more over time, but remember that it is no longer money available to you. If you are planning to buy a house soon, it may be better to save up a bigger deposit to get the best rates for a mortgage.

One suggestion that might make you feel better is to work out what the CTF would be if you had saved cash, and add money to keep the account at that value. For example, let's say you expected the account to now have £1000. Top up the account with £74. Every 12 months, add 6% to the previous value. Next June you would expect £1060. If the account is less, top it up again. If the account is more than £1060, do nothing but congratulate yourself on achieving a better return than savings. This way you are buying more shares when they are "cheap" and none when they are doing well. After about 5 years, you'll hopefully find that the shares are so far beyond your 6% return that you're never adding anything.

dunstonh

Can only really add to above. You havent lost money because of provider but lost because of the investments and the state of the markets in the short term.

Investments zig zag in value and can drop in the short term. Thats normal.

cloud_dog

From the sound of your post you don't seem particularly comfortable with the idea of having the monies in an investment as opposed to a savings account.

I think you need to consider your approach to risk, investments may fall further, are you willing to live with a 20% fall in the value of your CTF???? The upside of an investment as opposed to savings is that at aged 18 your son could have a fund which is worth a lot more that it would have been in a savings account, twice possibly much more.

If you do not feel it is the right thing transfer the monies to a CTF savings account.

For the record my 4 yo daughters CTF is invested (by myself), and from aged 13 onwards I will start moving the investments in to a safer form.

cloud_dog

spspyrou

I've had the paperwork for an ASDA child trust fund in my top draw for a few months now but have been a bit iffy about how the market was going... not that it has dipped, (the stock market is today pretty low) is my thinking right that today (or at some point this week) is possible a good time to proceed? Or do I need to wait a while for current stock market rates to become a benefit? I'm confused...

growingafamily

We invested the initial cheques but any money we save ourselves are in a high interest savings account.

crumpetman

My sons CTF is down a few pounds too. I had a quick search to find how to transfer it to a new provider but it seems that none of them accept transfers in from other providers, they all stipulate that the CTF is opened with the voucher from the Inland Revenue.

Can anyone recommend a suitable provider? Failing that I may just put a matching figure in a savings account/bond as I do not intend to put my own money in the CTF.

dunstonh

changing CTF provider isnt going to do a thing. They are down in the short term because the markets are down. In a typical 5 year period you would expect at least 1 bad year.

Keeping the CTF in cash is almost wasteful as it only really ensures they will have £250 in real terms when they get of age. At least the investment option gives the potential for real growth.

wornoutmumoftwo

Being the optimistic person that I am, I have today set up two children's bonds for my boys, running for 15 & 16 years, cashable when they turn 21.

It is with Family Investments, as is the child trust fund, and the man I spoke to confirmed that their investments are linked to the stock exchange, so I'm thinking (hoping), that I will actually get more units(?) for my money now and that this will pay off for my children in the long run.