Children's Portfolio

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Children's Portfolio

  1. 1. Draft Suitability Paragraphs – The Children’s Portfolio (GUB Update) This document is for use by Financial Advisers and is provided for reference and information only. The paragraphs below are for possible inclusion in a suitability letter for Financial Advisers recommending The Children’s Portfolio from The Children’s Mutual. Paragraphs should be selected, adapted and personalised, as appropriate. Section 1 – Introduction • We have discussed your circumstances and identified that your priority is to make long-term regular investments to obtain a target lump sum for (your son/daughter/forename ) in the future. • Our discussions included the various long-term investment options available, including tax-efficient forms of investment and in order to meet your particular needs I have recommended (# number ) plans from The Children’s Mutual. These plans are to be held within The Children’s Portfolio – a concept that allows you to include a combination of investment plans offered by The Children’s Mutual. • The Children’s Portfolio is a concept that helps you to invest towards a specific goal at a specific target date. It offers flexibility by allowing you – and others – to invest collectively using a personalised combination of plans, all under the same ‘umbrella’. You are provided with yearly progress checks to help decide if adjustments may be needed to stay on track towards your target. • Using this Portfolio, it was discussed and agreed that the contributions listed below would be made. You feel that this is an affordable level of regular contribution and expect this situation to continue until the Target Date chosen. • As (your son/daughter/forename ) was born after 31 August 2002 (he/ she ) is eligible for the Government’s Child Trust Fund (CTF). This means that (he/she ) (will receive/will have received ) a Government voucher (worth £XXX ) which you, as the parent, can use to open a CTF account in (his/her) name. (The Government also intends to make a further payment when (forename ) reaches age 7, although the amount has yet to be agreed). • As (your son/daughter/forename ) was born before 1 September 2002 (he/she ) is not eligible for the Government’s Child Trust Fund (CTF). • We have discussed the investment risks involved in the different investment plans and your attitude toward the level of risk you are willing to take for this investment. • The plans I recommend to be held within The Children’s Portfolio are listed below.
  2. 2. Plan names In the name of Amount of regular (and/or single) contribution Baby Bond® (CTF) Baby Bond® Choice (CTF) With-Profits Savings Plan Stocks and Shares ISA Growing Up Bond (OEIC) • We have agreed to regularly review this combination of investments to help ensure that your objectives are achieved. Section 2 - Why The Children’s Mutual? • The Children’s Mutual offers a range of investment plans specifically designed to help parents - and grandparents, other family members, godparents and even family friends - invest for a child’s future. Children’s Mutual is a brand name of Tunbridge Wells Equitable Group with all the benefits of long standing heritage and considerable expertise in the ‘investment for children’ market. The Children’s Mutual is the only UK provider specialising solely in investments for children. • The Children’s Mutual (as Tunbridge Wells Equitable) was voted a 5-star provider in the 2004 service awards given by Financial Adviser magazine in both the Life & Pensions and Investment categories. It was also awarded, by the same publication, the unique accolade of Company of the Year 2002 and 2003. Section 3 - Why The Children’s Portfolio? • As mentioned within Section 1 – Introduction, The Children’s Portfolio is a concept that helps you – and possibly others - to invest towards a specific goal at a specific target date. • The proposed structure of the Portfolio is customised for you and your investment goal for (forename ). • We have discussed and agreed that a combination of investment plans, as listed above, is most appropriate to your needs.
  3. 3. Section 4 – Plan Details Baby Bond® Why Baby Bond®? • We have discussed the various options available for (your son ’ s /daughter ’ s / forename ’ s ) Child Trust Fund (CTF) account and your contributions to it. Our discussions covered both stakeholder and non-stakeholder CTF accounts and included various types of investment options available for inclusion under the CTF scheme. • We have discussed and agreed that a stakeholder CTF account would be the most suitable plan for your needs. A stakeholder CTF account allows you and your child to benefit from the considerable tax advantages available, as well as a statutory limit on the level of charges that can be imposed. • The Baby Bond® from The Children’s Mutual is a stakeholder Child Trust Fund account and therefore includes these features. Tax-free Benefits • The Baby Bond® plan is tax-free - by this we mean that all investment growth is free from Income and Capital Gains taxes and that there will be no personal tax to pay on the amount paid out at age 18 (provided the child is resident in the UK at that time) . Where investment funds receive UK dividend income net of corporation tax, neither the fund nor individual taxpayers can reclaim this tax. • In addition to any Government payments, up to £1,200 a year in total can be invested in a CTF account. • You should remember that these tax benefits are not guaranteed. They are subject to legislation and may change in the future. The Risks Involved • You are attracted by the growth potential offered by stockmarket-based investments but do not wish to accept more than a moderate level of risk on this investment. • All payments (including the Government contributions) are initially invested in a FTSE All-Share Tracker Fund. You appreciate that the price of shares in this fund can go down as well as up, that such movements are outside the control of The Children’s Mutual, and that the proceeds at age 18 could be less than the total amount invested.
  4. 4. • As this plan is a stakeholder arrangement, it includes a ‘lifestyling’ facility. This allows investments to be automatically and gradually switched into lower risk assets in the final five years up to age 18 - although this does not guarantee any minimum level of performance. It is possible to opt out of lifestyling if required. Access to Funds • We have discussed and you accept that under this type of plan:  each of the contributions is treated as a gift to (forename ) and cannot normally be refunded to the payer, should they change their mind,  the funds invested cannot normally be withdrawn before (forename ) reaches the age of 18, and  the proceeds are paid direct to (forename ) at age 18 with no restrictions on how the money is spent.
  5. 5. Baby Bond® Choice Why Baby Bond® Choice? • We have discussed the various options available for (your son ’ s /daughter ’ s / forename ’ s ) Child Trust Fund (CTF) account and your contributions to it. Our discussions covered both stakeholder and non- stakeholder CTF accounts and included various types of investment options available for inclusion under the CTF scheme. • We have discussed and agreed that a non-stakeholder CTF account would be the most suitable plan for your needs. A Non-Stakeholder CTF account allows you and your child to benefit from the considerable tax advantages available, with a wider choice of investment options. • You are aware that, whilst a stakeholder version of the CTF is available (which includes a limit on charges and a lower minimum contribution), stakeholder plans offer a restricted investment choice. You agree that your needs are better addressed by a non-stakeholder plan. • Baby Bond® Choice from The Children’s Mutual is a Non-Stakeholder CTF account and therefore offers both tax advantages and investment choices. Tax-efficient Benefits • The Baby Bond® Choice plan is tax-efficient - by this we mean that all investment growth is free from Income and Capital Gains taxes and that there will be no personal tax to pay on the amount paid out at age 18 (provided the child is resident in the UK at that time) . Where investment funds receive UK dividend income net of corporation tax, neither the fund nor individual taxpayers can reclaim this tax. • In addition to any Government payments, up to £1,200 a year in total can be invested in a CTF account. • You should remember that these tax benefits are not guaranteed. They are subject to legislation and may change in the future. The Risks Involved • There is a wide range of investment funds to choose from, offering a varying degree of risk. You appreciate that, whichever fund or funds are chosen, the price of shares in these funds can go down as well as up, that such movements are outside the control of The Children’s Mutual, and that the proceeds at age 18 could be less than the total amount invested. However, you are attracted by the growth potential offered by mainly stockmarket-based investment and, in return, are willing to accept a corresponding level of risk with your child’s investment. • ‘Lifestyling’ is available as an optional feature. This allows investments to be automatically and gradually switched into lower risk assets in the final five years up to age 18 - although this does not guarantee any minimum level of performance. Access to Funds • We have discussed and you accept that under this type of plan:
  6. 6.  each of the contributions is treated as a gift to (forename) and cannot normally be refunded to the payer, should they change their mind,  the funds invested cannot normally be withdrawn before (forename ) reaches the age of 18, and  the proceeds are paid direct to (forename ) at age 18 with no restrictions on how the money is spent.
  7. 7. With- Profits Savings Plans (Baby Bond ® Extra, Youngster Bond Extra and Friendly Bond) Why a With-Profits Savings Plan? • We have discussed the various long-term investment options available and agreed that a long-term with-profits savings plan for a term of a fixed number of years would meet your particular needs • The Children’s Mutual With-Profits Savings Plans offer the features you require. Tax-free Benefits • As you (and/or your child) have not used (your/their ) friendly society tax-free allowance, under this plan up to the first £25 a month or £270 a year can be invested in a fund which is tax-free. • By tax-free we mean that all investment growth is free from Income and Capital Gains taxes, and that there is generally no personal tax to pay on the amount paid out at the end of the savings period. The fund receives UK dividend income net of corporation tax, but neither the fund nor individual taxpayers can reclaim this tax. • You should remember that these tax benefits are not guaranteed. They are subject to legislation and may change in the future. • As you intend to contribute (£XXX ) a month to the plan, The Children’s Mutual will issue two separate plans; one tax-free, the other taxable. The taxable fund is subject to income tax and capital gains taxes on investment growth. Again, there is generally no further tax to pay on the amount paid out at the end of the savings period. (Note for Advisers. This last paragraph needs to be customised to fit the plans being recommended) The Risks Involved • You wish to adopt a cautious approach to risk under this particular investment and are attracted by the combination of a guaranteed minimum lump sum payout at the end of the investment period together with the opportunity for a bonus to be added each year. • All payments are invested in the Tunbridge Wells Equitable Life Fund. This fund invests in a range of assets including company shares, bonds, gilts and cash. The value of the fund can do down as well as up and such movements are mostly outside the control of The Children’s Mutual. Movements in the value of the fund, together with The Children’s Mutual’s policy towards the “smoothing” of investment returns, may affect the level of bonuses. • Bonuses are not guaranteed and depend on factors such as the performance of the fund over the full investment period. However, once added the yearly bonuses are guaranteed and cannot be reduced or taken away provided that all payments due have been made at the time the plan ends. There is also the possibility of a further bonus being added when the plan ends, but this is not guaranteed. • I have told you that more information about the way The Children’s Mutual manages its With-Profits fund can be found in its “Principles and Practices of Financial Management”, a consumer friendly version of which will be available on request.
  8. 8. Access to Funds • We have discussed and you accept that this type of plan requires a long- term commitment and is not designed to provide access to funds in the short-term. • I have confirmed and you accept that money can only be withdrawn before the plan ends if it is cancelled and that this may mean getting back less than has been paid in, especially in the early years of the plan. • You are also aware that the plan will belong to (forename) and, if it ends when (he/she ) is aged 18 or over, the proceeds will be paid to (him/her) with no restrictions on how the money is spent. Note. The paragraph above should only be used where a plan in the name of the child is being recommended.
  9. 9. Stocks and Shares ISA (Individual Savings Account) Why Stocks and Shares ISA? • We have discussed the various options available and the level of contribution you wish to make. • The Stocks and Shares ISA offers a way for those aged 18 or over to invest in a stockmarket-linked fund with significant tax advantage (see below). Tax-free Benefits • This plan is tax-free up to the contribution limits of £7,000 in a Maxi ISA or £4,000 in a Mini stocks and shares ISA, in any one tax year. Each tax year runs from 6 April to the following 5 April. • By tax-free we mean that investment growth is free from Income and Capital Gains taxes, and that there is no personal tax to pay when your investment is cashed in. Where investment funds receive UK dividend income net of corporation tax, neither the fund nor individual taxpayers can reclaim this tax. • You should remember that these tax benefits are not guaranteed. They are subject to legislation and may change in the future. • The current ISA regime is only guaranteed to continue until April 2010. If your chosen investment period extends beyond this date, it may not be possible to continue paying into, or to hold invested funds in, the ISA after then. The Risks Involved • There is a choice of three investment funds, offering a varying degree of risk. You appreciate that, whichever fund or funds are chosen, the price of shares in these funds can go down as well as up, that such movements are outside the control of The Children’s Mutual, and that the proceeds payable could be less than the total amount invested. However, you are attracted by the growth potential offered by a mainly stockmarket-based investment and, in return, are willing to accept a corresponding level of risk. • ‘Lifestyling’ is available as an optional feature of The Children’s Portfolio. This allows money to be gradually and automatically switched into the lowest risk fund (the Medium Term Fixed Interest Fund)– typically starting five years before the Target Date, although this does not guarantee any minimum level of performance. Access to Funds • Only the adult who originally took out the ISA can decide how and when the proceeds are spent. • Money can be withdrawn from the ISA at any time, subject to certain limits of amount withdrawn and amount remaining invested after withdrawal. Full details can be found in the Key Features document.
  10. 10. Growing Up Bond Why Growing Up Bond? • We have discussed the various options available and the (amount you wish to invest)(level of regular contribution you wish to make) . • The Growing Up Bond provides access to a range of onshore, that is, UK based, Open Ended Investment Company (OEIC) funds, specially selected by The Children’s Mutual as suitable for long-term investment for a child’s future. OEICs are collective investment arrangements offering the features you require including professional fund management, single pricing and investment spread. • • You prefer the legal protection and security that onshore funds such as those available through Growing Up Bond offer compared to investing in an offshore fund. Taxation • This investment takes advantage of the favourable tax treatment of OEICs, which are not subject to income tax and capital gains tax. However, individual investors may be subject to both taxes, although the capital gains tax liability may be reduced or eliminated through the use of the annual allowance and taper relief available under capital gains tax rules. The Risks Involved • The Growing Up Bond offers a range of investment funds with varying degrees of risk. You appreciate that, whichever fund or funds are chosen, the price of shares in these funds can go down as well as up, that such movements are outside the control of The Children’s Mutual, and that the proceeds payable could be less than the total amount invested. However, you are attracted by the growth potential offered by this type of investment and, in return, are willing to accept a corresponding level of risk. • ‘Lifestyling’ is available as an optional feature. This allows investments to be automatically and gradually switched into less risky assets (which could include alower risk OEIC fund) starting five years before the Target Date and ending one year before this date. However, this does not guarantee any minimum level of performance. Access to Funds • As the bond is to be taken out in your name, only you can decide how and when the proceeds are spent. • Money can be withdrawn from the bond at any time, subject to specified limits if only part of the accumulated proceeds are withdrawn. Section 5 - Investment Funds Why Gartmore? • Gartmore Group is a global investment manager providing investment management solutions for its clients. It believes that there are three fundamental qualities clients should expect from an investment manager: secure ownership, quality people and excellent performance. Gartmore’s
  11. 11. experience has been gained over 30 years in managing assets for institutional and retail investors. • Founded in 1969, Gartmore’s main UK office is located in the City of London. Gartmore Group’s key professionals own up to a maximum of 20% of the company. Gartmore Group has offices in the US, UK, Spain, Germany and Japan and has £42.7 billion funds under management. Gartmore Cautious Managed Fund - Overview • The fund aims to increase in value through a combination of retained income and long-term capital growth. Investment will be in a diversified portfolio of equities, bonds and other related investments. At all times the investment in equities will be limited to a maximum of 60% of the value of the Fund’s portfolio. • The fund may also invest in other transferable securities, money market instruments, cash and near cash, derivative instruments and forward transactions, deposits and units in collective investment schemes and other permitted investments and transactions. Gartmore European Growth Fund - Overview • The fund aims to provide investors with long-term capital growth by investing in a diversified portfolio of Continental European investments. Income yield is of secondary importance and is likely to be minimal. The fund is biased towards the larger European stock exchanges, although investments in equities traded on the smaller markets will be made if the investments are considered sufficiently marketable. Emphasis is placed on individual stock selection with attention paid to asset allocation by country. • The fund may also invest in other transferable securities, money market instruments, cash and near cash, derivative instruments and forward transactions, deposits and units in collective investment schemes and other permitted investments and transactions. Gartmore US Growth Fund - Overview • The fund aims to achieve a long-term return in excess of the long-term return that is typically achieved from North American equity markets, by investing in:  companies having their registered office in North America,  companies that do not have their registered office in North America but either (i) carry out a predominant proportion of their business activity in these markets, or (ii) are holding companies which predominantly own companies with registered offices in North America. • The fund will invest in companies of both small and large market capitalisation. Investment will be mainly in the United States of America. The return will be a combination of capital and income returns. • The fund may also invest in other transferable securities, money market instruments, cash and near cash, derivative instruments and forward transactions, deposits and units in collective investment schemes and other permitted investments and transactions.
  12. 12. Why Invesco Perpetual? • Investment is Invesco Perpetual's only business - so with no distractions from competing interests, they are able to focus all their global resources on investment performance and personal service. • Invesco Perpetual is the retail division of INVESCO UK. INVESCO UK is part of the global AMVESCAP Group - one of the world's largest independent global investment managers. • As a member of the AMVESCAP Group, Invesco Perpetual benefits from its worldwide network of experienced professionals, able to feed back information on the best investment opportunities in their respective markets. Invesco Perpetual Income Fund - Overview • The Invesco Perpetual Income Fund aims to achieve a reasonable level of retained income, together with capital growth. The fund intends to invest primarily in companies listed in the UK, with the balance invested internationally. In pursuing their objectives, the fund managers may include other investments that they consider appropriate which may include units in collective investment schemes, warrants and other permitted investments and transactions. Invesco Perpetual UK Smaller Companies Equity Fund – Overview • The Invesco Perpetual UK Smaller Companies Equity Fund aims to achieve capital growth in the UK. The fund intends to invest primarily in shares of smaller companies in the UK. In pursuing their objectives the fund managers may include other UK related investments that they consider appropriate which may include units in collective investment schemes, warrants and other permitted investments and transactions. Invesco Perpetual World Growth Portfolio – Overview • The Invesco Perpetual World Growth Portfolio aims to achieve capital growth from a portfolio primarily of Invesco Perpetual funds. In pursuing their objectives, the fund managers may include other investments that they consider appropriate which may include transferable securities, warrants, deposits, derivatives and other permitted investments and transactions. Why Insight Investment? • Insight manages £74.6 billion on behalf of clients (as at 30/09/04), and employs over 151 investment professionals, making it one of the UK's largest investment managers. Their hand-picked teams of experts have a successful track record and cover the full range of asset types: equities, bonds, property, hedge funds and private equity. Insight European Ethical Fund - Overview
  13. 13. • The Fund aims to achieve long-term capital growth by investing primarily in shares of UK and/or European companies which meet a range of ethical criteria. • The fund manager will invest in a diversified portfolio of European and UK companies which, after being analysed using EIRiS specialist computer software, are deemed to be ethical in their practices. Criteria which these companies are screened on include: gambling, human rights and animal abuses. Insight Evergreen Fund - Overview • The Fund aims to achieve long term capital growth by investing in shares of companies throughout the world whose products, processes or services contribute to the restoration of the Earth's ecology or to a cleaner and healthier environment. • A robust negative screening process with the EIRiS specialist computer software is used. This enables the exclusion of companies involved in activities such as tobacco, animal testing or nuclear power as set out in the Fund's policy. Why UBS Global Asset Management? • UBS Global Asset Management provides investment products and services to private clients, financial intermediaries and institutional investors around the world. They are one of the largest global institutional asset managers, the second largest mutual fund manager in Europe and the largest mutual fund manager in Switzerland. • Their strengths lie in a globally integrated investment organisation and disciplined processes, the expertise and diversity of their employees, as well as in the quality and responsiveness of their client service. UBS Managed Fund – Overview • This Fund aims to achieve long-term capital growth through active management of a diversified portfolio invested primarily in domestic and international equities and bonds. UBS UK Select Fund – Overview • This Fund aims to achieve long-term capital growth through active management of a diversified portfolio invested primarily in UK equities. UBS Medium Term Fixed Interest Fund – Overview • This Fund invests in a portfolio consisting primarily of gilts, money market instruments and other debt securities. The primary objective of the fund is to limit risk of overall loss to investors over the short to medium term. Subject to this, the Fund will aim to maximise returns relative to the Barclays Capital 1 to 5 Year Gilt Index over time.
  14. 14. Section 6 – Other Details • I have provided you with a Key Features document (which, for the CTF accounts and the ISA, includes the Terms and Conditions) and personalised illustrations for each of the plans recommended. We have discussed the points covered by these documents including the (commission/fee) we will receive for arranging this investment for you. (Footnote applicable to Baby Bond® and Baby Bond® Choice only. This must appear whenever Baby Bond® is covered.) • ‘FTSE’ is a trademark of the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited (‘FTSE’) under licence. All-share is a trademark of FTSE. (Footnote applicable to Baby Bond® / Baby Bond® Choice and Baby Bond® Extra) • Baby Bond® is a registered trademark of Tunbridge Wells Equitable Friendly Society.

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