How might the pandemic affect my Child Trust Fund?
The COVID-19 pandemic is still making waves and affecting our day to day lives, with many of us having to adapt our normal routines. The pandemic has also had a significant impact on global investment markets, and this has likely affected many savers throughout the UK including those of us who hold a Child Trust Fund account. In particular, those CTF accounts that are directly tied to the stock market, also known as Stakeholder accounts.
While happier times undoubtedly lie ahead, we’ve built this webpage to answer some of the more pressing questions from our CTF Members about how the pandemic could be affecting Child Trust Fund savings in the current situation.
Looking at the facts
It probably comes as no surprise that the COVID-19 pandemic has shaken up stock markets all over the world with many investors feeling the pressure of sudden drops in the value of their funds. We explore this further in our blog post here. As this market shakeup continues, we have seen a reduction in the value of our Child Trust Fund accounts that are directly linked to the stock market. These are known as Unit-Linked Accounts or Stakeholder Accounts.
The potential impact on you
What this could mean is that the current value of your Child Trust Fund is less than it was before the pandemic. This, justifiably, can cause many of us to panic and try to take action. However, is this the best decision?
Those of our CTF Members who hold a Stakeholder account directly invest in the UK stock market. This comes with a degree of risk and means the value of your CTF account can fall as well as rise. Unfortunately, this means that, at the moment, the current value of your CTF may be less than you were expecting. It’s important to pay attention though when we say at the moment. As the value of your account can change weekly, so by the time your account matures, it’s likely the value will be different.
What are your options?
It’s natural that many of those affected would be keen to take action in response to this. However, when it comes to Child Trust Funds, access to your fund is still limited to when your account matures on your 18th birthday. You do still have options though, although these do vary depending on when your account is due to mature, we set these out below:
Have a look at your options by clicking on one of the links below.
Good things come to those who wait and while markets are currently having a bit of a hard time, once the world begins to recover, markets should follow. We’d love to be able to tell you what will happen to the value of your account in the future, but unfortunately, we simply don’t know. Unless one of us finds that crystal ball that we’re all looking for. In the meantime, we have put together some FAQs below. If you still have a burning question that needs answering, you can get in touch with our team here and we’ll happily help you.
The COVID-19 pandemic has had a profound impact on stock markets around the world including the ones that our CTF stakeholder accounts are invested in. This means that the value of our CTF Stakeholder accounts has dropped in-line with market conditions and maturing Stakeholder accounts may have a lower value than expected.
While all our funds have been affected by the pandemic, it is those funds that are directly linked to the UK FTSE Share index (the UK stock market) that have been affected the most. This includes our CTF Stakeholder accounts.
We cannot predict the future performance of the UK stock market or markets around the world. Therefore, the value of your CTF account could fall as well as rise. If you are uncomfortable with this risk, there are a number of options you can take to change the type of account that your savings are invested in. We explain in more detail above.
We can’t comment in detail on the performance of the funds of other providers. However, we can note that if these funds are linked to the UK stock market or any other markets around the world, then the value of these funds will likely have reduced in-line with the drop in the value of the markets that they are invested in.
If your CTF account is a Stakeholder account, you could consider transferring to our Non-stakeholder account or to a Junior ISA. Our Non -Stakeholder accounts invest in our With Profits fund. This is a low to medium risk fund which spreads the risk by investing in a number of different assets. Our Non- Stakeholder account offer guarantees on your investments. We explain this in more detail above. It’s important that you understand the product and read the Key Information Document and Terms and Conditions before you make a decision to switch. If you switch to a Junior ISA you cannot switch back to a CTF at a later date.
We cannot predict the future performance of our funds any better than any other providers. While the value of our CTF Stakeholder accounts have fallen recently, the value of these funds can also rise in the future as the market recovers. CTF is a long term investment and over time a stock market investment aims to provide growth, however this is not guaranteed and you could get back less than has been paid in.
Please Note: You must confirm you have read the key facts, before downloading this document.
Key Facts about our services and costs
1. The Financial Conduct Authority (FCA)
The FCA is the independent watchdog that regulates financial services. This document is designed by the FCA to be given to consumers buying certain financial products. You need to read this important document. It explains the service you are being offered and how you will pay for it.
2. Whose products do we offer?
We offer products from the whole market
We only offer products from a limited number of companies
We only offer our own products
3. Which service will we provide you with?
We will advise and make a recommendation for you after we have assessed your needs.
You will not receive advice or a recommendation from us. We may ask some questions to narrow down the selection of products that we will provide details on. You will then need to make your own choice about how to proceed.
We will provide basic advice on a limited range of stakeholder products and in order to do this we will ask some questions about your income, savings and other circumstances but we will not:
conduct a full assessment of your needs;
offer advice on whether a non-stakeholder product may be more suitable.
We can only offer products from Kingston Unity Friendly Society. These products will enable you to:
protect yourself and your loved ones in the event of death
save and invest with the added benefit of protecting yourself and your loved ones in the event of death
provide benefit cover in the event of sickness
4. What will you have to pay us for our services?
Normally, if you buy a financial product direct from us, there will be no payments such as commission or fees payable. If there are any commission or fees payable, we will tell you how we get paid and the amount before we carry out any business for you.
5. Who regulates us?
Kingston Unity Friendly Society, 9 Navigation Court, Calder Park, Wakefield, WF2 7BJ is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and .the Prudential Regulation Authority. Kingston Unity Friendly Society’s FCA Registered Number is 110056.
Kingston Unity Friendly Society permitted business is advising and arranging life assurance and pensions business.
You can check this on the FCA’s Register by visiting the FCA’s website www.fsa.gov.uk/register or by contacting the FCA on 0845 606 1234.
6. What to do if you have a complaint
If you wish to register a complaint, please contact us:
…in writing Write to Kingston Unity Friendly Society, Complaints Department, 9 Navigation Court, Calder Park, Wakefield, WF2 7BJ. …by phoneTelephone (01924) 240164
If you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service.
7. Are we covered by the Financial Services Compensation Scheme (FSCS)?
We are covered by the FSCS. You may be entitled to compensation from the scheme if we cannot meet our obligations. This depends on the type of business and the circumstances of the claim.
Most types of insurance business are covered for 90% of the claim with no upper limit.