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Are high fees eating into your child’s savings?

We’ve recently been looking into fees on child trust funds as we knew that many people could save money by switching their child’s CTF to the Beanstalk JISA, but we did not know quite how much. The answer: collectively the savings could be £200 million!

As a reminder, to encourage parents to save for when their children became adults, the government gave a voucher to every child born between 1 September 2002 and 2 January 2011. The voucher, which typically had a value of £250, had to be used by the parent to open a Child Trust Fund within a year of the child’s birth (If parents failed to do so, the government opened a CTF for the child from a list of approved providers). CTFs were replaced by Junior ISAs in 2011 and transfers between CTFs and Junior ISAs have been allowed since 2015.

When the government introduced the scheme, they set a fees cap of 1.5% for stakeholder CTFs, a level that seemed appropriate 15 years ago but is now much higher than many Junior ISAs such as Beanstalk's. Despite this many providers have kept their fees at 1.5%, perhaps because parents are not completely aware of what they are paying.

There are estimated to be up to six million CTF account holders in the UK, with the last CTFs due to mature at the start of 2029. We took a look at which providers these accounts were with and worked out that if every child under 16 with a high fee stakeholder CTF of over 1% were to switch to a Beanstalk, collectively they would save £200 million in fees for the remainder of the life of the accounts.

For a 12 year old child with a CTF worth £2,500, it could add up to a saving of over £100 meaning more for them to enjoy at 18. You can see how much you could save on your child’s CTF by using Beanstalk’s simple CTF Transfer Calculator.

To find out where a Child Trust Fund (CTF) is held if you do not know the provider, all you need to do is complete an HMRC online form and include your full name, address, date of birth and National Insurance number. You can access the form here: https://www.gov.uk/child-trust-funds/find-a-child-trust-fund.

AS WITH ANY INVESTMENT THE VALUE CAN GO DOWN AS WELL AS UP. PAST PERFORMANCE IS NO INDICATOR OF FUTURE PERFORMANCE. THE TAX TREATMENT OF ISAS DEPENDS ON YOUR INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN THE FUTURE.