Child trust fund matured – options.

Both of our kids were born in the era when the government gave every child £250 into a child trust fund, which we added to over the years with small monthly payments. Providers were limited, and fees have been outrageous. F&C have been taken over twice, most recently by the awful Columbia Threadneedle – total fees on the pot last year were 4.6%!!

Trustpilot reviews seem to share my disdain for them.

https://uk.trustpilot.com/review/columbiathreadneedleus.com

Hopefully we will get the money out soon, but what to do with it? I’m thinking to start a SIPP and a Lifetime ISA/Normal ISA in their names. The 20% tax relief boost on SIPP/LISA are attractive, even though the flexibility of the ISA would be handy too, hence the spread.

Firstly – It’s not your money – it’s your childs. Talk to them.

…but Coke and Hookers it is then! Going to be a great 18th party! 🙂

Some is, some isn’t, as we ran a parallel Junior Investment account to put money into, but you are right. I just wondered what others do, before I start the conversation with them.

Also, that 4.6%!!!! Quoted charges of £25/year, but the rest is all random disbursements and admin charges… I pay less fees in total on my workplace pension 15x the size.

We will have the same situation in our house soon enough, I like the 50/50 SIPP ISA idea, I think getting them to realise their pension is their responsibility early is important, but as mentioned above, in oit case at least it will all be their money and could just as easily be spent on a trip to Ibiza and a vauxhall corsa, which is not neccesarily a bad thing either

My daughter bought a new iPhone and spent the rest on horse stuff! 🤣

But we’re only talking about just under a grand as we never put anything in.

To be fair she still has the same iPhone over 3 years later so it’s saved us 3+ years of phone contract.

Family circumstance will be a factor on what you do with it though – how much you can help with other big commitments for them that come with turning 18. LISA looks good on the surface but the terms can be restrictive if it’s needed for something other than a house.

Daughter just turned 18, similar CTF converted to a junior ISA a few years ago. I/she went with £1 in a LISA. I/she put the remainder in an ISA. I/she had already started a SIPP.

Similar, I’ve already started out kids at 11 and 15 on their understanding of savings, pensions and compounding.

My sons has perform outrageously well and he’ll have circa £25-£30k when he’s 18, I’m hoping to sit down and have some sensible discussions.  Part of that will involve moving to a cheaper SIPP.

We saw it as a useful exercise in introducing them to the baffling world of finance products and their own longer term financial future. We weren’t talking tens of thousands so a bad decision will probably not be the worst financial decision of their life.

LISA is quite an appealing option for a “grown up” but its worded in a way that to a teenager is quite off putting: “if you ever want to access this money for anything other than buying a house or you being a million years old we will clobber you”. An ordinary ISA is a “sensible” product – but its designed for tax efficiency. How many teenagers are worrying about tax? SIPP wasn’t considered here – but I’m guessing as its a pension its appeal to a teenager will be low – even if the spreadsheet says its the best investment option. All these things are actually really unfair – they help wealthy kids set themselves up better for the future; the same kids who’s parents are most likely to help them anyway and who will most probably one day benefit from inheritance.

When I was a little older than they are I got a small amount of cash and it paid for a beaten up fiat panda and its insurance. Financially stupid decision – although it did mean I could do things that potentially helped me get a better job, live slightly further from work so spend less on rent, etc. I’m sure my pension would be better if I’d put that in a SIPP (if they existed!) 30+ years ago. But that might have been the Sliding Doors moment that meant diverted to a different career path and earnings potential and thus pension etc anyway so I wouldn’t over analyse the “Best” decision.

I am in a similar situation with Thump.

Most / all of it will be used to help with Uni costs.

Son bought his car with his, daughter put hers into high interest savings and spent a very small amount on laptop. The annoying thing is we were trying to keep the ‘value’ secret/as a surprise until it matured, but immediately they sent letters to our ‘kids’.

I came from a very working class family, dad had teenage polio and missed 3 years of school, so no qualifications. Ive never had financial assistance and was pretty illiterate in the ways of finance. Its only since working in a job that puts a large pension pot under my control that I’m getting to understand more.

We are paying all maintenance/accommodation fees for both kids at uni. I see this as a one off chance to put them ahead of the game, with numbers similar to Kryton.

Just like Kryton and dantsw13 I saw it as an 18 year drip drip towards uni costs.
Fees were horrendous and it’s a scandal how much appointed firms were getting away with fees on locked in money.

Our oldest two both chose to use theirs towards paying for the cars we bought them when they turned 18

My nephew just got his last year and promised to save it for a house deposit, or similar.

Yeah … no… He’s just deciding that work isn’t really for him so far, but his mum (my Sis) is powerless because

Firstly – It’s not your money – it’s your childs. Talk to them.

Relies on them listening of course.

I migrated my kids’ child trust funds into Vanguard Junior ISAs a few years ago. Account fees are only 0.15% per year, plus the fee of the fund(s) you choose to invest it in (0.22% for the one we’re in).

Their ISAs have given a lifetime return of over 12% so far, so not doing badly at all.

I moved one of the kids into a JISA a while ago and am in the process of moving another as well. We didn’t add anything to them over the years, just used good interest child savings accounts/bonds.
Oldest turned 18 this year and the total amount in her CTF consisted of half a new iPhone for uni……

As @bensales, we moved ours out into Vanguard, I think that was about eight years ago now. We’re drip-feeding them in the hope that when age 18 rolls around they’ll have somewhere north of £10-15k to put towards uni or something useful/interesting/fun. Returns and fees seem to be better than what they would have got.

Edit: I think it was an excellent initiative. Hopefully one day we’ll have a government willing and able to introduce something similar.

I have no views on the investment vehicles mentioned but would be surprised if there was a tax relief boost on money where (presumably) no tax has been paid.

There is, but it is limited to £2860/year.