'A long way to go' – Child Trust Funds warning as Britons unaware they could get lump sum


Child Trust Funds were a long-term tax-free savings account for children, however it has now been replaced by the Junior ISA scheme. For people who already have a trust fund in their name, it is possible to add up to £9,000 a year to their Child Trust Fund account. Any money placed into the account belongs to the child whose name it is under and can be accessed by them once they turn 18 years of age. Upon their 18th birthday, account holders can choose to either withdraw it in cash or use it to build their investment portfolio and savings through ISAs.

Dan Brocklebank, head of Orbis Investments UK, outlined the many benefits offered to young savers through the trust fund scheme.

Mr Brocklebank said: “With global equities outperforming cash over the long-term, and with today’s combination of low interest rates and inflation, the 44 percent of young recipients who opted to put their money in to a cash ISA might want to think about making their money work harder for them by staying invested in stocks and shares.

“Given the long timeframes involved, we would also encourage parents who are still putting money away for their children to seriously consider the benefits of stocks and shares over cash.

“History shows the awesome power of compounding over long periods of time: £100 saved in cash when CTFs were launched would today be worth £141.

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“That same £100 invested in global stock markets would be worth £593, over four times more.”

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However, Mr Brocklebank is also reminding people that many more potential young savers are still unaware of the benefits of Child Trust Funds.

He added: “I’d also note that while it is encouraging that awareness of CTF entitlement seems to have risen over the last year.

“There is still a long way to go – 41 percent are still unaware of the lump sum amount they will receive.”

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According to a nationwide survey carried out by Orbis Investments, awareness of the benefits of Child Trust Funds has risen over the past year.

Last year, only 38 percent of those aged 16 and 17 year-olds were knowledgeable about the money, while 62 percent did not.

However this year, 59 percent of the same age demographic was found to have awareness of the money they owned.

Nearly a third of those polled by the investment firm said that they planned to save the cash, but not in an ISA.

This was followed by 21 percent who invested into stocks and shares, while another 21 percent invested into cryptocurrency.

Some 18 percent admitted to using the money for a mortgage deposit, while around a quarter said they bought gifts for their friends and family.

Since the launch of Child Trust Funds in 2002, the MSCI World Index has returned 9.9 percent per annum whereas cash has returned just 1.8 percent over the last two decades.

When investing, it’s very important to be aware that capital is at risk.





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