Child Trust Fund Piggy Bank

Child Trust Funds – Your Choices

Coronavirus and your Child Trust Fund

The outbreak of coronavirus has had a significant impact on global financial markets with stock markets seeing initial falls of up to 30% in value since the beginning of the year. Despite markets recovering some, but not all, of their value what does this mean for holders of Child Trust Funds?

Our Child Trust Funds

Healthy Investment offers two types of Child Trust Funds;

Our Stakeholder Child Trust Fund meets the government’s criteria and invests in a wide range of stocks and shares to minimise the risk of one share or industry underperforming. The fund is currently 100% invested in the Legal & General UK All Share Tracker Fund, which means that you are investing in the UK’s top 600 companies.

Our Ethical Child Trust Fund invests in the Healthy Investment Unit-linked Ethical Child Trust Fund that contains a mix of stocks and shares, government and corporate bonds, commercial property and some cash deposits. It has no direct investments in the alcohol, armaments and tobacco industries or gambling and adult entertainment services.

Fund Values

Watching a fall in the value of your Child Trust Fund can be painful but it’s worth remembering that history shows us that values generally go up over the longer term.

Cash is no safety net either. During a period where interest rates are lower than inflation, the real value of cash is falling. Bank interest rates have been cut to almost to zero and the returns from cash sitting in the bank will be negligible.

Unlike the stock market, cash is most likely to lose real value in the next few years.

True, things could get worse but almost everyone believes that they will eventually get better.

According to virtually all investment market experts, now is not the time to liquidate stock market investments unless in real need of cash.

When the Child Trust Fund was invested with Healthy Investment the initial and any subsequent investments purchased a number of units in the fund. Your statement will show how many units you have.

The price of a unit rises and falls with the value of the shares invested in. You can calculate the value of the Child Trust Fund by simply multiplying the number of units by the current unit price which can be found on our website here.

16 year old Child Trust Funds

The children who were first to receive the government’s Child Trust Fund vouchers are now 16 and 17 years old. Perhaps it is time to talk about the CTF and how the money that’s been invested for them is going to be used?

The government’s rules for Child Trust Funds means that from their 16th birthday the child can take control of the CTF, decide where the money is invested, transfer the fund to another provider or transfer to a Junior ISA, although they can’t withdraw the money until they reach 18.

When 18 the options will be to withdraw the money, keep it invested in either a CTF continuation account or ISA, or transfer it into another savings account or investment. The details of the continuation account have not been finalised by the government yet but are widely expected to follow the current CTF rules surrounding the underlying investment mix, so maintaining the opportunity to benefit from future growth in investment markets.

Unless your child has a real need for the monies that have been invested for them we believe that parents should be talking to their children about the benefits and risks of keeping it invested until they really need it.

If you already have a CTF with Healthy Investment you can:

  • Leave it where it is. Its value will rise or fall in line with the fund in which it’s invested. Our Stakeholder CTF tracks the All Share stock market index.
  • Transfer it to a Healthy Investment Junior ISA and watch its value grow by the addition of annual bonuses with a guarantee of 100% return of the initial investment plus the added bonuses when the child reaches 18 on all money invested for 5 years or more.
  • Transfer your CTF to another provider in the hope that its performance will be better than it would be with Healthy Investment. This could be a cash CTF or cash Junior ISA where your capital cannot fall in value but the interest is unlikely to keep pace with inflation.

If you do not have a CTF with Healthy Investment you can:

  • Transfer your CTF to one of Healthy Investment’s CTF funds, one which invests in an index tracking fund, the other, our Ethical CTF, which invests is a mix of stocks and shares, government and fixed interest corporate bonds, commercial property and some cash deposits.
  • Transfer your CTF to a Healthy Investment Junior ISA and watch its value grow by the addition of annual bonuses with a guarantee of 100% return of the initial investment plus the added bonuses when the child reaches 18 on all money invested for 5 years or more.

Healthy Investment is an ethical provider with over 185 years experience of providing savings and investments. Whilst we can’t give you financial advice on the suitability of any Child Trust Fund or Junior ISA for your personal circumstances and attitude to risk, our dedicated membership team can discuss the various options open to you. You can contact them on 0161 762 5790 where they will be delighted to help or via email on enquiries@healthyinvestment.co.uk .

Nothing in this article represents financial advice which can only be provided by an FCA authorised financial adviser. Past performance is not a guide to future performance.

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