Your Child Trust Fund was set up for you to help you save for your future. Now you are turning 18 you can choose what to do next
Receive a LISA bonus of up to £1,000 each year
Through long-term investing, some investors are now ISA millionaires
Pay no capital gains tax on profits made in an ISA or LISA
The Child Trust Fund (CTF) was set up to help young people save for their futures. Once you turn 18-years-old, the fund will mature and you can choose what to do with the money available.
Take it, invest it or mix and match?
Whether you plan to travel, go to university or begin your career, money will be a factor. And now, with your CTF set to mature, you can decide to withdraw the money, stay invested, or both.
A CTF gives you flexibility as you can take part of it as cash for your immediate needs, but also keep the rest invested as you plan for your long-term financial independence.
Having cash set aside for immediate needs or unexpected expenses can be a good idea. You can put money in a cash savings account but it is important to bear in mind that with interest rates currently very low, inflation will erode the value of those savings.
Over 118 years, the average yearly return for cash was 0.7% and the return for stocks and shares was 5.1%.* If you look at this over 30 years, this means an investment of £4,000 would earn 3.6x more when invested in stocks and shares versus a cash savings account.
The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance.
EQi does not provide investment advice. If you are in any doubt as to the risk or suitability of an investment or product you should seek advice from an independent financial adviser.
To assess which account might be a good fit, think about your long-term goal. Is it buying your first house? Is it investing for financial independence? Or both?
Your life goal: Saving for my first home
What’s the big appeal? The government bonus. It will pay a 25% bonus on what you invest in a LISA – which can mean up to £1,000 a year if you add the maximum contribution of £4,000.
Any other plus points? Even when you’ve bought a house, the bonus will still be paid on what you invest, right up until you are 50.
What are the downsides? Because the bonus is essentially free money, the government are strict about what you can use it for. It can only be taken out to buy your first home or at age 60; otherwise there is a penalty on the withdrawal.
You also can’t transfer your CTF investments directly into a LISA. When you first come out of a CTF, we can arrange to sell and re-purchase the same investments in your LISA on your behalf free of charge.** It is important to note that as share prices fluctuate, you might get more, or less, when these are re-purchased.
Your life goal: Building a tax-free investment which I can access when the time is right
What’s the big appeal? You decide when to use the money you’ve built up.
Transfer into the EQi flexible stocks and shares ISA to keep any gains tax-free and access the money when you need it.
Any other plus points? Usually, there is a limit of £20,000 you can pay into an ISA, but the government is waiving this for any transfers from a CTF.
What are the downsides? As with all investments, the value can fall as well as rise.
You need to be prepared to leave your money invested for five years or more, to ride out market volatility.
To take the next step and tell us what you would like to do when your CTF matures, please see manage your maturity.
For answers to your questions about your maturing CTF, please see our dedicated FAQs