Q. My two children are aged 14 and 10. The younger child received a child trust fund but the older one missed out. We like to treat them equally so invested in a Junior ISA for the elder child a few years ago. I understand that Child Trust Funds have now been stopped, so what can we do now?
A. Child Trust funds (CTF) were introduced in April 2005. A government contribution for children born between 1 September 2002 and 2 January 2011 could be topped up by a contribution of up to £1,200 per year from parents or grandparents, and the fund could grow free from income and capital gains tax. In 2011 Junior ISAs were created for those children under 18 not eligible for Child trust Funds, offering a higher contribution limit but no Government contribution. Subsequently the contribution limits have been aligned, and finally with effect from 6th April 2015, it will be possible to transfer existing CTFs into Junior ISAs. The taxation and investment options will be much the same, and the child will become entitled to access the fund as their own at age 18. However for families such as yours, where the rules have caused your different children to qualify for different types of account, it is probably helpful that they can now have the same thing!
Q. I was told that I should insure my income against illness or accident preventing me from working. My Independent Financial Adviser gave me a quotation but my bank is quite a bit cheaper which surprises me. Why is it that the IFA, who has the choice of the market, cannot beat the bank?
A. It may well be that you are not comparing like with like. There are a number of influencing factors when it comes to purchasing income protection. Firstly the best policies will pay out if you are unable to carry out your “own occupation” whereas the worst will only pay out if you cannot work at all. For example an electrician would not be able to work as an electrician if he or she became colour blind, but could easily perform another job. The latter type of policy would not pay out in this case whereas the policy with a definition of “own occupation” would.
Other factors also influence the premium such as, at what age does the benefit stop? What waiting period is employed before the benefit starts i.e. 3 months 6 months or 12 months? Is the premium guaranteed or reviewable which may go up in the future?
I would suggest that you take your quotation to your IFA and ask him to compare and explain the differences between the two. I would be surprised if you do not find that in reality the IFA has come up with a much better deal.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
