Equity Child Trust Fund
The Equity Child Trust Fund we offer is provided by Legal & General and invested in the L&G (N) Tracker Trust and provides the potential for greater growth over the long term, through investing in the stock market.
The fund is structured as a unit trust. When you invest in a unit trust fund, your money, along with that of other investors, is pooled together and invested in the stock market by the fund managers. They oversee the management of the fund on your behalf, to ensure that the fund meets its objective.
It is important to note that any additional contributions made by you, family or friends into the CTF cannot be withdrawn until your child's 18th birthday and that only your child will have access to the money at that time.
Legal & General Equity Stakeholder Child Trust Fund objective
To produce long-term capital growth by tracking the FTSE All-Share Index.
- return is linked to the growth of the FTSE All-Share Index*
- it's tax-efficient – there's no personal tax to pay on the investment returns
- it's a stakeholder fund, so it has low charges and further contributions can be made from just £1
- it's easy to check the value of your child's investment on our fund price page or in the Independent newspaper
- it's flexible, so you can invest as and when it suits you, subject to annual allowances**
- regular statements on the fund's performance and overviews of the markets in which it invests will be provided
*The FTSE All-Share is an index of share prices of around 690 leading companies listed on the London Stock Exchange.
**The law relating to tax may change in the future. The value of any tax advantage will depend on your child's individual circumstances.
Equity investments and past performance
If you're looking to make the most of your child's money over the years, and are willing to take a risk, it's worth taking a closer look at what the stock market could offer. This type of investment is available through Legal & General's Equity Stakeholder Child Trust Fund.
Stock market-based investments can often be unpredictable, particularly over the short term. But as the chart shows, day-to-day changes in value become less of a problem if you're prepared to invest for the long term, 5-10 years, and able to benefit from general trends.
The graph below shows how the FTSE All-Share Index has performed over the last 18 years*.
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Source: Copyright © 2007 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Based on initial investment of £250. 18 years to 31/10/2007, gross income reinvested. This illustration relates only to the initial voucher investment of £250 and does not take into account any charges applied to the Child Trust Fund.
*In this graph we have used the Bank of England Base Rate as we have not provided a comparable savings account that covers the period 1989 to 2007. Over this period we have provided a number of children's savings accounts with variable interest rates that have at times paid more or less than the Base Rate. The Base Rate has been illustrated here to provide a comparison between potential cash savings interest rates and equity returns over this period.
Risks
As this is an equity based fund there are some risks that you should consider.
Capital risk: HIGH RISK - The value of your investment will vary in line with the performance of the UK equity market, as measured by the performance of the FTSE All-Share Index.
Inflation risk
Investments included in the fund have the potential to exceed inflation over the longer term. However, the actual rate of return is subject to market variation, and there is no guarantee that the money you invest will keep pace with inflation. Where your investment makes a capital loss, the real value of your loss may be significantly greater due to the effects of inflation.
Shortfall risk
The fund may not achieve sufficient returns to help you meet your specific savings goal.
Rate of return risk
Your child may receive no return from your investment, or a lower return than you would have liked.
Accessibility risk
Your child will not be able access the money until their 18th birthday. You can transfer to another equity or cash CTF at any time. Given the potential for significant market variations in the fund's value and its rate of return, you should be prepared to invest your money for at least five years in the equity fund.
Complexity risk
Some long-term investments can be more complex than others, which is why we aim to explain things clearly, fairly and accurately.
If you need advice, contact your local branch for an appointment with your Senior Financial Consultant