Should You Re-Think the Trust for Your Child?
Giving your children a secure financial future is a hope many of us share. We all try to put funds aside that will give our little ones the best possible chance in life. But until now, and rather ridiculously, your child’s date of birth has determined the performance of their savings.
If your child was born between 2002 and 2011, chances are that they will be invested into a Child Trust Fund (CTF). Whilst saving for the future is a positive, unfortunately given the restrictive amounts that could be invested in a CTF, the products available to use were fairly poor and didn’t offer the opportunity of good investment management, and thus, good returns. And, as if to add insult to injury, up until now you have been unable to transfer your CTF into its modern day equivalent the Junior ISA (JISA). But that is about to change.
From April 2015, the Government have finally relented, admitting that this non-transfer rule was grossly unfair. You can now transfer your child’s limp, lifeless and under-performing CTF into a brand new, sparkly JISA! But why transfer?
- Where we manage your investments on a platform with a discretionary investment manager, we can do the same with your children’s JISA. That means they get amazing ongoing discretionary management on a pot of money that would normally be too small to justify it.
- If your Child Trust Fund is held in Cash, and you want to keep it that way it’s a no-brainer. Cash JISAs pay more than the top CTFs, and there is far more choice. That said, bear in mind with where interest rates are, and given these are likely to be long term investments, a diversified portfolio is likely to deliver better ongoing returns over the long term (although this is not guaranteed of course).
- Fees tend to be lower for JISAs than for CTFs, however it is worth checking with your provider. JISAs still have the same features as CTFs, for example: your child cannot access the funds in their JISA until they reach the age of 18.
- Transferring from a CTF to a JISA is really easy.
- For some people, where one child has a CTF and one has a JISA, monitoring performance is complicated, as it is split over differing accounts. Having all children invested in the same vehicles makes reviewing and monitoring performance far simpler, and simpler still if it is the same as your own portfolio.
It is worth noting here that transferring from a CTF to a JISA is a permanent move, so you must consider your options. The main consideration should be the charges your CTF provider may make for you to transfer out. In most cases, the JISA will outperform the CTF to such an extent that these charges will be quickly recouped, but it is worth checking.
If you would like to discuss transferring our child’s CTF to a JISA, we would be delighted to help. We will weigh up the options and suggest the best option for you and your family. If you do, please complete and return the enclosed form and we will find out the details of your current CTF, and if appropriate draft the paperwork to get it transferred to a JISA.