# Child Trust Funds



## Cozzer (Dec 18, 2007)

Hello,

Does anybody have any advice on child trust funds? Are they worth investing in. I saw recently on the news that they are currently worth less than what has been paid into them, as the stock markets have tumbled again.

Has anyone else opened one of these? Or am I better off just opening up a savings account for the little one?

Thanks


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## -ROM- (Feb 23, 2007)

Speak to a financial adviser about it, at the same time make sure your life assurance and income protection is up to date. After all if you lose your job or worse your little 'un is still gonna need to be looked after and that takes money.


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## CupraRcleanR (Sep 2, 2007)

the £250 voucher you get for the child is free so go for it.

http://www.childtrustfund.gov.uk/


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## GlenStaff26 (Mar 10, 2007)

Hi Cozzer

We opened a Child Trust Fund with the £250 the govt give and add another £10 pm via direct debit. We chose the one that gives you a load of Nectar points, not sure if it is still an option as this was 18 months ago. At the time I think I read in the Sunday Telegraph or something that as far as plans go it is quite a good one.

Now, as I am unsure about how it will perform we have also opened a reasonably high interest savings account for her and the weekly child benefit gets paid into that (with the £10 a month dd to her trust fund coming out of it). 

Not sure how much help this is though.


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## CupraRcleanR (Sep 2, 2007)

One key point is that when the child comes of age they can spend the fund on whatever they want as *they* have total control not you! They could end up blowing it on silly things like car washing crap!

Some people don't like that idea so take the vouchur (which the child will eventially control) and set up a regular saving Stocks and shares ISA in you name. Stocks and shares tend to outperform deposit based investments over the longer term although you would be stepping into a risk based investment.

As above speak to a Financial Adviser for full advice.


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## -ROM- (Feb 23, 2007)

CupraRcleanR said:


> One key point is that when the child comes of age they can spend the fund on whatever they want as *they* have total control not you! They could end up blowing it on silly things like car washing crap!
> 
> Some people don't like that idea so take the vouchur (which the child will eventially control) and set up a regular saving Stocks and shares ISA in you name. *Stocks and shares tend to outperform deposit based investments over the longer term although you would be stepping into a risk based investment. *
> 
> As above speak to a Financial Adviser for full advice.


plus you can put £7200 in each year instead of the £3600 IIRC. As you say there is an element of risk, i tend to go for a balance and split my investments equally between low risk low return, high risk high return and somewhere in the middle.


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## CupraRcleanR (Sep 2, 2007)

rmorgan84 said:


> plus you can put £7200 in each year instead of the £3600 IIRC. As you say there is an element of risk, i tend to go for a balance and split my investments equally between low risk low return, high risk high return and somewhere in the middle.


The rules on ISA's changed last April so that you can put up to £3600 in Cash ISA (deposit based no risk) and the other £3600 in the Stocks and Shares ISA. If you say put just £1 in the Cash ISA you could put £7199 in the S&S bit. Most will do abit of both although some will go for the full wack in the S&S ISA. Cash ISA's are good for short term savings and emergency funds and are suited to the risk averse people.

Alot of Companies charge an "initial charge" for setting up a S&S ISA which is usually 5% of whatever goes in. i.e £100 per month only £95 gets invested. Halifax has no initial charge and the Annual Management Charge is comparable with the others.

Last thing before you fall to sleep. :lol: Usually the longer the time period the higher the initial risk you could take. Nipper just born saving for 16-18 years should do well but nothing wrong with a spread as you have said. Good time to get in at the mo. You'll be buying cheap "units" with your £100 at the mo as we know the market is on its bum!


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## -ROM- (Feb 23, 2007)

CupraRcleanR said:


> The rules on ISA's changed last April so that you can put up to £3600 in Cash ISA (deposit based no risk) and the other £3600 in the Stocks and Shares ISA. If you say put just £1 in the Cash ISA you could put £7199 in the S&S bit. Most will do abit of both although some will go for the full wack in the S&S ISA. Cash ISA's are good for short term savings and emergency funds and are suited to the risk averse people.
> 
> *Alot of Companies charge an "initial charge" for setting up a S&S ISA which is usually 5% of whatever goes in. i.e £100 per month only £95 gets invested. Halifax has no initial charge and the Annual Management Charge is comparable with the others. *
> 
> Last thing before you fall to sleep. :lol: Usually the longer the time period the higher the initial risk you could take. Nipper just born saving for 16-18 years should do well but nothing wrong with a spread as you have said. Good time to get in at the mo. You'll be buying cheap "units" with your £100 at the mo as we know the market is on its bum!


I am quite fortunate in this sense as an uncle is an IFA so i don't have to pay any admin/setup costs. I go full whack in to S&S.


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## CupraRcleanR (Sep 2, 2007)

rmorgan84 said:


> I am quite fortunate in this sense as an uncle is an IFA so i don't have to pay any admin/setup costs.


Save's a few quid that.:thumb:


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## Cozzer (Dec 18, 2007)

The little one isn't born yet, so i was looking to get this set up soon. Theres an extra 50 quid if the due date is the actual birth date. 

I think il stick on the safe side as i've only heard of the very few lucky ones who actually get large returns from investments. As its going to be a long term thing, i think it would be wise to go with a savings trust fund for the nipper.

We are all better off moving to another country where its cheaper to live and your money goes a lot further. (plus the car products are cheaper and there's better weather)


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## evosport (Mar 27, 2008)

Just had my son's trust fund annual statement in, invested £220 this year but fund only worth an additional £65,reason stock market. However, as unit linked policy will be be buying more units when price low so will get back this lose in future. Fingers crossed.

These are long term inverstments


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## Chris_R (Feb 3, 2008)

Does anyone know if you can change it to another bank once you have invested the voucher?
Reason being I originally stuck our daughters in with HSBC before I found out that they are a bunch of cretins.
I would prefer to move it to be housed with Lloyds TSB who have our other 3/4 accounts for savings and standard accounts.


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## sayloday (Oct 5, 2008)

Yes you can move a CTF to another company. When I changed one of my daughters CTF I had to contact the new company I wanted to transfer to, for a form to fill in and they sorted it out. 

So contact Lloyds/TSB and ask them for a transfer form.

Dave


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## 1animal1 (Aug 20, 2008)

Personally id go for F&C Management and leave the banks alone, where equities are concerned they tend to use funds that are mostly non ranking, F&C have a decent set of funds (largest choice) and offer a full range that meet many different risk profiles 

My brother wanted to go cash but there really is no point, obviously some dont want risk but with inflation piled on, the real return will be next to nothing - especially given the economy now - average bank rate 4-4.5%....CPI inflation 5.1%.... negative return before you start


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## reign (Oct 6, 2008)

i kept my kids out of stocks for just a reason like this recession. i'd say put it in a secure, high interest bearing savings account (research bradford and bingley) and just make monthly contributions, so they've got a secure nest egg waiting.


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## 1animal1 (Aug 20, 2008)

point is that anything that goes in cash now will be eroded by inflation....equities are a good thing to go into now because they are so cheap..... 

you put £250 in now will buy less when it matures if rates stay same as they are now... equities generally have a 5 yr cycle and have proven ever since the beginning of time that over 5 years tthey outperform everything including property, bonds and cash (which happens to be one of the least returns over the longer term)....putting money away monthly merely gives you a lower interest rate, 1st payment in a year gets 12months of the headline rate, the 2nd payment gets 11/12's of that advertised rate and so on which means by the end of the year your return has gone from 4% to something like 1.8% which is ridiculous


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## reign (Oct 6, 2008)

1animal1 said:


> point is that anything that goes in cash now will be eroded by inflation....equities are a good thing to go into now because they are so cheap.....
> 
> you put £250 in now will buy less when it matures if rates stay same as they are now... equities generally have a 5 yr cycle and have proven ever since the beginning of time that over 5 years tthey outperform everything including property, bonds and cash (which happens to be one of the least returns over the longer term)....putting money away monthly merely gives you a lower interest rate, 1st payment in a year gets 12months of the headline rate, the 2nd payment gets 11/12's of that advertised rate and so on which means by the end of the year your return has gone from 4% to something like 1.8% which is ridiculous


good to know!!!!!! looks like im going to buy diamonds!


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## 1animal1 (Aug 20, 2008)

your money mate...i do this for a living


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## reign (Oct 6, 2008)

1animal1 said:


> your money mate...i do this for a living


............i've suddenly got a new best friend......:thumb:


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## 1animal1 (Aug 20, 2008)

reign said:


> ............i've suddenly got a new best friend......:thumb:


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## bilt-hamber kid (Dec 4, 2007)

Cozzer said:


> Hello,
> 
> Does anybody have any advice on child trust funds? Are they worth investing in. I saw recently on the news that they are currently worth less than what has been paid into them, as the stock markets have tumbled again.
> 
> ...


As of the other day, this was the best deal, offering (then - check now) 5.5%.

http://www.thehanley.co.uk/child-trust-fund_265.html

Don't sweat the small stuff. Get this set up properly with the minimum of fuss but make sure that you look properly into making sure that if anything happens to you, as income earner, your family is protected.

Don't forget either - you can use it save £1200 per birth year tax free as well, so why not get the family involved as well? If they chip in £a bit instead of offering early Xmas or birthday presents (that junior won't ever be bothered about anyway), that might be worth a lot more.

Good luck with the nipper :thumb:.


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## 1animal1 (Aug 20, 2008)

5.5% is pretty good considering, wonder what it will go down to once they have your money.....regardless of that, minus inflation from the 5.5% and after 18 years your child will get exactly what they started with, equivailent what £250 is in todays terms..... IF that building society stays afloat offering silly percentage rates that they cant sustain given the market conditions


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## bilt-hamber kid (Dec 4, 2007)

FSCS applies if it folds.

The trick I guess, is to keep on top of things and if need be, keep switching to stay ahead. Either way, its still a useful sum to help towards education or to stick into a pension fund at 18. Accepted though, there is valid criticism that a CTF offers no real advantage over an ordinary savings accounts (because most children are non-taxpayers anyway of course), but if you put money into that ordinary account it can get taxed as your money. That doesn't happen with a CTF. CTFs also get kids focused on saving and they can't be touched so there's no temptation to dip in.

As a parent, if you can afford to, whack in the whole £1,200 a year without any tax liability _ever _being created. Its a handy way of sheltering some funds from the taxman - we wouldn't get that with a normal savings account. Fidelity published a survey that suggested that, at 6% a year (ha), a child born in September 2002 would receive a pot of £11,355 at 18 if parents put in slightly over £20 a month on top of the voucher handouts (£500 of course, if you're poorer). However, make the maximum possible payments into the CTF and your kid could be looking at a fund of £45,458, and thats not to be sneezed at. If it was in a normal savings account, the parents would be taxed to buggery on it.

PS: Then, chuck it into a pension, get 20% additional contribution from the State and junior is on the way to financial security (hopefully!).


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## 1animal1 (Aug 20, 2008)

Yup the FSCS does apply, you really dont want the hassle though of having to move your money around rate chasing, especially when cash rates are below inflation. You could well have a pot of £11355..... this wouldnt pay for half of most Uni fees currently, in 18 years time you have absolutely no chance what so ever..... its all about what £250 means to you, at 5% your £250 is likely to be worth at maturity exactly what its worth now and will buy you exactly the same.... you look at any graph of past history, cash rates are some of the lowest paying over any given 5 year period and dont sit much higher than inflation. Obviously this is all a matter of opinion and risk. The other factor is that £20 per month would not get the headline rate, it would get an aggregated rate based upon time invested during that year so all in all, your busting a gut (switching and contributing)to maintain the £250's value for no benefit. Im not knocking the money from the government, but if they gave it straight to you now to spend, it wouldnt last 2 seconds...that is exactly what will happen when you get your 5% in 18 years time, it has (virtually)no real growth at all

Inflation minus the rate = real growth

currently you'll be lucky to get a whole percent, even when the UK was at its peak 18 months ago, you wouldnt have got 5% real growth....


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