Discount Broker for investments, insurance & mortgages
Contents
General
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After money is paid into a Child Trust Fund it is locked in. This means that it can only be accessed by the child when he/she is 18, except as permitted by the Child Trust Funds Regulations. Any contributions made to the CTF cannot be returned to the donor.
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The CTF will not be opened until any cancellation period has expired.
Comparison between stakeholder CTFs and non-stakeholder CTFs
There are three main types of Child Trust Fund account: stakeholder accounts; non-stakeholder accounts, and savings accounts (these are also non-stakeholder accounts). Non-stakeholder accounts are any accounts that do not meet the characteristics and conditions of a stakeholder account.
Savings Accounts (this is a non-stakeholder Child Trust Fund)
Savings accounts are cash accounts where the money deposited earns a rate of interest. This interest rate will need to be greater than the rate of inflation to provide a real return on the investment. This is because prices usually rise each year, which is why £250 won’t buy as much today as it did ten years ago.
As with all accounts, CTF providers will charge you for the costs of running a savings account. However, these costs are taken into consideration by the provider when deciding the interest rate, so will not be separately identified.
Clubfinance does not arrange this type of Child Trust Fund.
Non-stakeholder Accounts (other than Savings Accounts)
These non-stakeholder CTFs may invest in shares or other assets. Investing in shares and other assets can be more risky than putting money in a savings account as they can lose value.
In the past, over the long term, share-based investments have, on average, usually produced better returns than savings accounts. This is because poor performance of shares in some years may be made up for by good performance in other years. However, individual share-based investments might perform better or worse than average.
You must remember that shares and other assets may go down as well as up and although these types of investment may have performed well in the past, this is no indicator of future performance.
The charges on this type of account are usually a percentage of its value, and may include initial (upfront) and/or annual charges. You should check how much these will be for your chosen CTF.
Stakeholder Accounts
Stakeholder accounts invest your child’s money in shares in companies when the account is opened, but the Government has made certain rules for these accounts to reduce the risk of investing in shares.
Your child’s money is not put into just one company, as they could lose out if that company does badly. Instead, it is invested in a number of companies to reduce the risk. Once your child is 13, unless you instruct otherwise, money in the account starts to be moved to lower risk investments or assets. CTF providers will consider how well shares are performing to decide how much to move over into safer assets and how quickly. This means that although your child’s money may not benefit if the stock market is performing well, the effect of any stock market losses is reduced as they approach their 18th birthday.
Once the account is open, all providers must accept a minimum contribution of £10 into a stakeholder account, but they can accept less if they wish.
The charge on the stakeholder account is limited to no more than 1.5% a year. This means the charge can be no more than £1.50 for every £100 in the account. The charges on all other types of CTF account are not limited in this way.
Characteristics of a stakeholder account
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The account does not directly hold the following investments:
- shares in an investment trust;
- securities of an investment trust;
- rights in with-profits endowment policies;
- rights, under a contract of insurance, in a with-profits fund;
- units or shares in a relevant collective investment scheme unless it is a requirement of that scheme that the purchase and sale price of those units or shares shall, at any given time, not differ from each other and that the price must be made available to the public on a daily basis;
- rights under a contract of insurance which are expressed as shares in funds held by the insurer unless it is a requirement of the contract of insurance that the purchase and sale price of those shares shall, at any given time, not differ from each other and that the price must be made available to the public on a daily basis;
- depositary interests, where the investments concerned are investments of any of the kinds listed above in this paragraph;
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subject to the following, the account must have exposure to equities, whether directly or indirectly;
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the account must have regard to:
- he need for diversification of investments of the account, in so far as is appropriate to the circumstances of the account; and
- he suitability for the purposes of the account of any investment, investment strategy or investment option proposed;
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except where otherwise instructed by the registered contact, the account is subject to lifestyling.
Satisfying these minimum standards does not automatically mean that the investment is suitable for your child, and does not mean that there is any guarantee of performance.
Glossary
Lifestyling means the process beginning from a date on or before the child is 13 years of age, or from when the account is opened, whichever is later, and continuing until the child is 18 years of age, by which the account adopts an investment strategy which aims progressively to minimise the variation or potential variation in capital value of the account caused by market conditions from time to time.
The Registered Contact is either:
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where the named child is under 16, only a single responsible person in relation to the named child, or
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where the named child is 16 or over, only the child.
The registered contact may give instructions to the account provider with respect to its management.
Clubfinance Ltd is authorised and regulated by the Financial Services Authority. Clubfinance offers an execution-only discount broker service; Clubfinance does not give advice or recommendations. If you have any doubt about the suitability of a particular product or service, or you require advice, you should seek a personal recommendation from an appropriate firm that does give advice. Clubfinance does not produce the products it arranges, or manage the underlying investments. Payments must not be made to Clubfinance, but to the relevant product provider. Contact details for Clubfinance can be found under ‘contact us’. Users of this website should be aware of the following:
Past performance is not a reliable indicator of future results.
The value of investments and the income from them can fall as well as rise as a result of market and currency fluctuations. For many types of investment, you may be placing your capital at risk, meaning that you may not get back the amount originally invested and you may risk losing your entire investment.
Some investments and policies may only be suitable as medium or long-term products.
Tax treatments depend on your individual circumstances and may be subject to change in future.
This website contains financial promotions relating to services offered by and products available through Clubfinance.
In the event of any conflict between product literature and information provided by Clubfinance, the product literature shall prevail.
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Clubfinance Ltd, all rights reserved.
Clubfinance Ltd. Registered Office: Charleston House, 13 High Street, Old Town, Hemel Hempstead, Hertfordshire, HP1 3AA
Telephone: 01442 217 287, Fax: 01442 241 045
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