The Child Trust Fund (CTF) calculator assumes a delay of three months between the child’s date of birth and the account being opened. This means that the potential growth of the value of the account in this time is not included in the calculation.
Savings accounts
This calculation is based on the following assumptions:
- A potential interest rate of 3.5%
- The rate used is an assumed rate of return of 4.5%, reduced by an assumed 1% to allow for the cost of charges by providers
- Providers will cover their costs in deciding how much interest to pay
- The interest rate will vary from provider to provider
- The results are an estimate of the return you might expect from a savings account. But remember that on most savings accounts the rate of interest paid can change throughout the life of the account.
Stakeholder accounts
This calculation is based on the following assumptions:
- A range of potential growth rates. The ones used here for the part of the stakeholder invested in shares are the Financial Services Authority's standard projection rates for Individual Savings Accounts (ISAs) and CTF accounts, which are 5%, 7% and 9%
- The full value of the investment is invested in stocks and shares up until age 13
- Moving money from shares into less volatile assets from age 13 (sometimes known as 'life-styling'). The effect of doing this will depend on market conditions at the time. Remember the value of shares can go down as well as up
- Providers will decide how much money to move from shares to less volatile investments and how quickly. For this calculation only, we have assumed that the less volatile investments will be the same as in savings accounts. We have also assumed that investments will be moved in the proportions in the table below. These are artificial assumptions (and not a model of what will happen in practice). In particular there is no obligation on providers (or expectation) that they will follow these assumptions
Year up to child's age | Proportion of investment in stocks and shares | Proportion of investment in cash |
|---|
13 | 80% | 20% |
14 | 60% | 40% |
15 | 40% | 60% |
16 | 20% | 80% |
17 | 0% | 100% |
- The calculator assumes an interest rate of 3.5% on the savings part of the account. This is the same as the interest rate assumed for savings accounts in the calculator. The interest takes account of a 1% charge by the provider as explained in the details under Savings Account
Management charge on savings accounts - The calculator only applies the Annual Management Charge which you have entered to the part of the account invested in shares (assumed to be the entire fund until age 13). Remember that management charges on stakeholder accounts can vary but cannot be more than 1.5% a year. The calculator therefore limits the annual management charge that can be entered for a stakeholder account to between 0% and 1.5%. The Government rules also mean that no additional management or administration charges can be made.
Shares accounts
This calculation is based on the following assumptions:
- A range of potential growth rates. The ones used here are the Financial Services Authority's standard projection rates for ISAs and CTF accounts, which are 5%, 7% and 9%
- The Annual Management Charge which you have entered. On accounts that are not stakeholder accounts there is no set limit for the annual management charge and providers may charge additional management and administration fees on top
- This calculation is based on the assumption that the full value of the investment is invested in stocks and shares up until age 18. Remember the value of stocks and shares can go down as well as up.
