HSBC’s stakeholder child trust fund shows a 30% return

As the government launches its inaugural Child Trust Fund Week, HSBC is urging parents not to miss out on the benefits to be made from tax-free savings for their children’s future after seeing positive growth on its own stakeholder child trust fund.

Child trust funds were launched by the government two years ago and are specially designed tax-free savings and investment accounts for children. They can be opened with a voucher that is automatically issued by the government following the birth of a child. Initially vouchers were tiered up to £277 depending on the month the child was born. This has since changed and current vouchers are set at £250 (this is doubled to £500 for children whose parents or guardians are on lower incomes).

HSBC has calculated that parents who immediately invested their £277 voucher in its own stakeholder (equities-based) account will have already seen their investment grow to over £361 - a growth of over 30 per cent in less than two years1.

Malcolm Prince, head of multi-tie investments at HSBC said: “HSBC is a strong advocate of financial education for children and the government’s child trust fund scheme. We urge all parents to make the most of the tax free benefits it provides, not only does it give children a financial boost for the future but also provides parents with a new way to help their children learn about saving money.

“We have opened 131,168 accounts since April 2005, 30 per cent of which were opened online, and it is pleasing to see that our customers are taking every opportunity to maximise the tax-free benefits on offer by topping up their funds by an average of £25 per month.”

HSBC’s child trust fund is as easy as A, B, C.

A is for access:

Opening a child trust fund with HSBC is child’s play, even for busy parents. Once parents have received their voucher from the government, they can either log on to hsbc.co.uk where they can open an account online, call 0800 520 420 or pop in to their local HSBC branch for an opening pack.

B is for baby:

Babies born in the UK on or after 1 September 2002 are eligible for a child trust fund and the vouchers are issued automatically by the government. Once opened, the account is held in the child’s name but a registered contact, usually a parent, will be responsible for the account until the child can take over at 16.

When a child reaches 18 they can access the money for whatever purpose they wish, giving them a great start in adult life. Should parents not put their voucher into a child trust fund within a year of receiving it the government will open one on their behalf.

C is for contributions:

Once a child trust fund has been opened, anyone can contribute, up to the maximum of £1,200 a year - mum, dad, grandparents, aunties, uncles or even friends. The average monthly top-up into HSBCs child trust fund is £25.

The government will make a further contribution of £250 (or £500) when the child reaches the age of seven. If more than £1,200 is contributed during the child’s birthday year HSBC will hold this money in an overflow account, paying a competitive rate of interest until the child’s next birthday, when it will be added to the fund.

For the first 13 years of the child’s life the HSBC child trust fund will invest in the HSBC UK Growth and Income Fund, providing the opportunity for long-term growth. There is no initial charge and the annual charge is capped at 1.5 per cent.

For the final five years HSBC will gradually move funds to lower risk investments such as deposits, reducing the impact of any stockmarket fluctuations as the child reaches 18. This is known as ‘lifestyling’. The registered contact can decide to opt out of lifestyling and leave all the money invested in equities.