I don’t remember feeling particularly grateful when my children got Child Trust Funds (CTFs). I was irritated at the idea of being bribed by Gordon Brown with my own money. I didn’t like doing the administration needed to ensure the £250 each was invested in reasonable funds. And I knew perfectly well that, just like most unaffordable and complicated minor vote grabbers, it wouldn’t end up being much of a long-term policy.
So it was no surprise to find one of George Osborne’s first fiddles was to abolish them. What was a surprise was to find that he replaced them with a good alternative (the Junior Isa, or Jisa), but then barred access to this for anyone who already had a CTF.
So children born after January 2011 and before September 2002 have access to a tax-efficient and flexible long-term savings product (Jisas can be rolled into adult Isa wrappers), while those born in the intervening months are stuck with inflexible, expensive products that self-destruct when they hit 18.
And if that hadn’t been enough to push me from mildly ungrateful to very irritated, it now seems that it isn’t just the government who has lost interest in CTFs. Last week F&C – the only fund manager to provide good and reasonable-value funds for CTF holders (via its investment trust business) and the one holding my family’s funds – announced that the 60,000 accounts with them are now to be charged a £30 administration fee every year. Add that to the other charges and it means any CTFs left with them will have vanished entirely within around ten years.
Leave your money in an F&C account, assume 8% growth a year (which you won’t get) and, says Hargreaves Lansdown, in 18 years you’ll owe the firm £125. I’m guessing this isn’t quite what Gordon had in mind.
So what can you do? If you want to salvage anything from this pig’s ear of a policy you’ll probably have to move (F&C won’t charge you to leave). You could shift to a CTF tracker fund at the likes of L&G, says Ali Hussain in The Sunday Times, if you can bear the fact that the management fee will be 1.5% year when the same fund costs 0.56% in a Jisa and under 0.3% elsewhere.
Or you could take the advice of AWD Chase de Vere’s Patrick Connolly and open a CTF account at the Share Centre. There is a 1% initial charge and a 0.5% annual charge on top of the management fees on the funds available. That makes it pretty pricey, but not quite as expensive as the new F&C deal will be for most people. Once that’s done you write/email/tweet your MP. It’s time to lobby them to lobby Osborne to allow all CTFs to upgrade to Jisa status.