Time to Switch your Child Trust Fund?

* For important information regarding the Child Trust Fund, Click here *

Investment in shares should be seen as at least a three to five-year commitment. This is to help smooth out the inevitable ups and downs of the stockmarket. Now you have had your CTF for a few years, it might be worth reviewing its performance.

There are regular articles in the press comparing the performance of different CTFs, so you can see how yours has done in comparison with others. Bear in mind, though, that past performance is not a guide to the future, so deciding to switch into the CTF that has grown the most in the last five years will not necessarily secure you the best returns over the next five.

If you have chosen a Child Trust Fund that allows investment in a range of shares or funds, such as F&C’s shares CTF (which offers a range of 15 investment trusts) or Selftrade’s shares CTF, which allows you to pick your own shares on the stockmarket, you will be able to move between different funds or shares without having to switch providers.

If your CTF is linked to one particular fund (as stakeholder CTFs tend to be), a change of fund will require a full-blown switch, unless you are switching from a stakeholder to another account with the same provider.

Counting the cost of cash...

You may have chosen a cash-based CTF, which offers you capital security but without the possibility of capital growth, as all returns are in the form of interest and the only ‘growth’ would come from interest reinvested.

If you are not willing to take any risk with your capital this is probably the best option for you, but you should be mindful of the effects of inflation on the buying power of your child’s fund.

For more on inflation you might want to check out F&C’s Moneyspinner service, a series of seven monthly emails exploring key investment themes. Don’t forget the CTF is essentially free money with an 18-year time horizon, so if you are ever going to take a bit of risk with an investment, it’s not a bad place to start.

You can always save in a children’s deposit account on the side, and interest will be paid gross if you fill in form R85, available from your bank or building society.

How to switch your CTF...

Switching from one provider to another: If you decide you want to switch your Child Trust Fund from one provider to another, you will need to fill in a transfer form from the provider you want to switch to. This provider will then contact your old provider to arrange the transfer of funds.