Our Chief Executive answers some of your Child Trust Fund questions

Absolutely not. The government will allow the money to remain invested for as long as the child (well they won’t technically be a child then) wants. It will either roll over into what HMRC are calling a CTF Continuation Account or into an ISA. It’s likely that these will have the same underlying investments as the CTF but it might be an idea to check with the provider.

When the child turns 18 there are lots of adult ISAs that they can open. Whilst HMRC hasn’t finalised the rules as yet we don’t think the funds in a CTF will count towards the adult ISA limit, which is now £20,000 per year. Children can open an adult cash ISA when they are 16 and a stocks and shares ISA from 18.

18 year olds can open 1 cash and 1 stocks and shares ISA each tax year with different providers if they wish but can’t exceed the annual ISA investment limit.

It’s hard watching the value of any investment fall, but remember that any stock market investment is designed to be a long term investment.

When the government introduced the CTF scheme they only allowed CTFs that invested in stocks and shares to be designated as stakeholder CTFs.

There are of course alternatives to a CTF that invests all the funds in the stock market but I would urge parents to think about the timing of making any change, you don’t want to sell out of stocks and shares when the markets at the bottom.

It’s also really important to think about what opportunities there are for growth in the CTF or Junior ISA that you transfer to. Cash is obviously the safest and you are absolutely guaranteed to get your money back but rates of interest are at an all time low and because they are less than the rate of inflation the buying power of the investment is actually reducing. There are alternatives like With-profits investments which invest in a range of different assets like stocks and shares, government and corporate bonds, property and cash deposits. Many With-profits policies include capital and growth guarantees and offer a less volatile investment return.

My advice would be to talk to providers and ask them to explain exactly what their CTF or Junior ISA is exposing your child to and what the return is likely to be.

The CTF matures when your child is 18 and it won’t be your decision as to what happens with the funds. If your child chooses to blow it on a week on Ibiza or wherever young people go these days there’s not a lot you as a parent can do. Legally it’s their money.

This makes it really important that your talk to your child as soon as possible about the CTF and what your hopes are for how they will use the money to give them a head start in adult life.

Don’t try and hide it from them; all of their friends will be talking about how much they got  from their CTF and what they’re planning on do with it.

There a 2 basic choices, draw it out and spend it or leave it invested. Most parents will want their child to keep most, if not all of it invested for their future so the more important question is where to keep it invested.

Doing nothing really is an option, it will carry on being invested in what HMRC are calling a CTF continuation account which is likely to have exactly the same investments and charges as the CTF. I don’t think investors will actually see much difference, so if it’s unlikely your child is not going to need the funds for some time is might actually be the sensible option.

They might want to think about taking less investment risk, despite most stakeholder CTFs being invested in the UK's top 600 companies in order to spread the risk, as it’s all invested in shares it is still a medium to higher risk investment and as we have seen recently the value of shares can be quite volatile.

If your child is thinking about transferring the CTF or the continuation account to a lower risk investment they need to think carefully about where they are moving it to and with the value rising and falling every day how best to time the transfer. A deposit account or cash ISA might be appropriate if they don’t want to take any risk but if money is held for any period of time what they can actually buy with that money is likely to be reducing.