CTF kids loose out to Junior ISA

[Brefferin]

After some uncertainty the government announced recently the new Junior ISA scheme that will replace the CTF scheme. Anyone who signed up for the CTF will loose out.

Those of us that have signed up for the CTF showed that we had faith in the policy buy adding in extra money, and now we are being penalised.

It's not fair. Those that have the Junior ISA will have access to a wider range of cheaper stock market products. Their children will have more choices when they turn eighteen simply because they will have more money.

The CTF holders have only a handful of providers to choose from. There is access to the whole range of stock market products through Redmayne Bentley, for instance, but this comes at a price - exactly £5 a month in dealing fees if you have two kids with CTFs.

£5 a month easily eats into any stockmarket gains over a long period, especially, since one can only put in up to £120 a month per child.

On the contrary, Index Trackers charge no dealing fees, yet so few are available to CTF holders. F&C has a few in its CTF offering; Legal & General has a lot more. The latter can't be accessed through a CTF.

Parents should be allowed to turn the CTF into an ISA. There is no reason why they shouldn't. Or, is there? I want answers.

There is still time. The Junior ISA regulation is still at the drafting stage. Will the treasury listen? If we shout loud enough they might!

I don't get that - you HAVE to have had a CTF if you had an eligible child. I didn't open one for DD2 (now nearly three) and one was opened for her after a year...! So basically, do you mean you've heard that only children born in the last year or so are eligible? Since they scrapped CTF?

I am not impressed at having a CTF opened for me on my behalf in that case

When DD1 (now 8) was a baby, I carefully chose her provider and added some money into it then too, but in the years inbetween, decided CTF were a waste of space

Yes. It means that every child born since the launch of the CTF is ineligible for the Junior ISA. Every child born after the CTF scheme was closed is eligible for the Junior ISA.

Unfortunately, we are stuck in a CTF time-warp unless the draft regulation is changed.

We can still add money to our CTFs, but the stock market products available to us are only a tiny fraction of those that will be available to Junior ISA subscribers.

These days stock market brokers have been reducing their fees to comply with some other new legislation. These are managed funds at a low price. We won't have access to them.

Don't write off the CTF though. It's still better investing in the stock market over 18 years than keeping the money in cash in a low interest account.

Well, I'm never the kind to keep anything in normal bank accounts for very long ;-) I regret putting money into DD1's CTF account though, and wish I could just reinvest it in a normal ISA or choose to invest in other ways beyond the limit of a ISA. I'm not sure the junior ISAs are really beneficial to a family unless you have already filled both of the adult's quotas in ISAs each and every year? Because there's lots more flexibility in ISAs for an adult than the junior ones sounds to be. Or are the fees a MASSIVE difference?

Please correct me if I am wrong in thinking this?

The advantage of the Junior ISA is that the child, nor you, can touch the money until he or she turns eighteen.

This should be the only difference between an adult and a Junior ISA.

When the CTF providers created their products they reduced the fees slightly compared to the fees charged to adults. However, the management fees, dealing fees etc on these products, both stakeholder and non-stakeholder accounts, are still higher that other bog standard tried and tested Index Trackers, for instance, which are not available through the CTF.

Put another way, if I had the choice to opt into a Junior ISA. I would find a provider such as Hargreaves Landsdown, that has low management fees and lots of transparency (because the funds performance can be viewed online daily), and place the money into a range of index trackers from M&G, Legal and General and HSBC- there's no commission fee, dealing fee and a very low management fee.

You get to keep more of the money yourself. I can't do this within the CTF because there is not a single provider that gives access to all these funds and other low cost funds for non-stakeholder account holders. I could do this easily within an adult ISA.

The CTF offers access to many managed funds, but they have up to 5% start-off fees, and higher management fees. If you are only making a profit on average of 7% a year the fees would soon eat this up.

JP Morgen has reduced the fees on its UK managed fund. This gives you access to the managers expertise at a lower price. Again, I can't reach this through a CTF.

In short, we will end up paying more in fees for a much smaller range of funds.

The stock market is supposed to be meritocratic, but this new Junior ISA scheme discriminates against CTF holders - the whole 5 million of the little critters!

it was never a good idea to invest anything extra in the CTF though - we never did

journalist i htink

Well spotted, Bluerodeo! I am a journalist. I don't cover politics or finance though. So, there's no conflict of interest. My interests come from having twins with their CTFs in tow.

The launch of the CTF coincided with their birth. I used Gordon's scheme to keep myself wake until the 2am breastfeed - going to bed early and getting up again didn't work out. Instead, I spent the early hours of the morning researching the different CTF providers. I know how to have fun!

Come to think of it just as well only a few companies offered this service it would have taken me months instead of weeks to cover all the ISA providers!!! before I felt comfortable about making an informed decision.

Anyway, the Chinese are now working hard to pay my childrens' uni fees...

You can put your ctf with Selftrade and get full access to any funds / ETFs etc you like without management fees. But I'd still rather be able to change dd1's ctf to a junior ISA like dd2 just so they are both under the same system and will get the same benefits at the end.