The top Child Trust Funds

by Simon Ward on 03 April 2013  |  4 comments
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The free vouchers may have been abolished, but if you have a Child Trust Fund you should still shop around for the best product.

There are over six million Child Trust Fund (CTF) accounts open, according to the latest figures from HM Revenues and Customs (HMRC).

This figure isn’t surprising, given that anyone who received a voucher for a child had an account opened for them automatically by HMRC if they didn’t do it themselves.

In this year's Budget, the Government bowed to pressure on allowing transfers from CTFs into Junior ISAs, which are generally paying higher rates (certainly in terms of cash accounts), by announcing a consultation into the move. Generally, and sadly unsurprisingly given the abolition of Child Trust Fund vouchers, it’s becoming harder to find really good Child Trust Funds.

And there was a further blow when CTF provider F&C announced that it was imposing an annual charge of £30 on its accounts, although you can switch your child's CTF somewhere else with no penalties.

Then and now

To illustrate how rates have fallen on CTFs, just three years ago the top rate for a cash CTF was 6.55%. If you want to transfer yours now, the best rate you’ll get is 3.05%. By way of comparison, the top cash Junior ISA pays 6%.

If you are keen to use CTFs as a way of providing money for your children when they reach adulthood, you definitely need to keep an eye on the market. Remember you can save up to £3,600 a year (£3,720 from 6th April). Or if you have an account that’s paying a lousy rate, why not switch?

To help you, we’ve rounded up the latest rates for cash accounts and some indicators of performance of share-based accounts.

Top cash Child Trust Funds

Below are the top-paying providers that will let you move your CTF to them.

If you do want to stick with cash, you might want to take a look at this list of all the providers on the GOV.UK website and see if there is a Credit Union near you. Credit Unions are offering reasonable rates, for example Bridgend Lifesavers is paying 4%. Plus you’ll be helping to make money available to your local community.

Stakeholder and share-based Child Trust Funds

If you have a stakeholder or self-select (where you pick the investments) Child Trust Fund you can choose to move it elsewhere, either into cash or into another stakeholder or self-select CTF.

Disappointingly, most stakeholder CTF providers are charging the maximum 1.5% management fee they are allowed to. So it’s worth shopping around to see if you can cut costs there. Some also charge additional expenses, such as F&C's annual fee. Ask for a full breakdown of the charges when you're comparing.

And remember that the Child Trust Fund is, by its nature, a long-term investment, so past performance is no indicator of what might happen in the future.

This article is regularly updated

More on saving for children

How to save for your child's future

Top savings accounts for kids

The best Junior ISAs

Why you shouldn't save for your kids