£110,000 potential piggy bank for children not eligible for CTFs

As the Government celebrates the second anniversary of the launch of the Child Trust Fund (CTF), millions of parents whose children were not eligible for this savings account may be wishing the Government had given their offspring a birthday present too.

However, JPMorgan Asset Management (JPMAM), the leading provider of investment trusts, says there is good news yet for these parents. Those who had regularly invested the equivalent monthly CTF amount for 18 years in a stockmarket-based fund would have built up a potential fund pot of nearly £110,000.

The Government’s rules on CTFs state that any child born on or after 1 September 2002 would be eligible for a £250 voucher which could be invested in a suitable CTF of their choice. Parents would also be able to top up the account to £1,200 per year. These Government-backed accounts have a place in parents’ savings toolkit; however parents should remember that these accounts are the start of the investment strategy, and not the whole journey. Alternative regular savings products, such as the JPMorgan Share Plan, can be used to build a potentially sizeable piggy bank for their children’s financial future.

For example, if parents had regularly invested £100 each month – the monthly CTF limit - for 18 years up to 28th February 2007, through the Share Plan, into UK-focused JPMF Mercantile Investment Trust, their children might have a fund value totalling £109,896. This compares favourably to a notional cash fund which may have grown to £32,712 over the same period.

James Saunders Watson, head of investment trusts sales and marketing at JPMAM said: “Financially supporting children through the formative stages of their lives such as sending them to school or university or getting a foot on the property ladder can be a big headache for many parents.

Our figures tell a simple story - saving regularly over the years can have a huge impact on a child’s financial future. With some simple forward planning done on their behalf now, children may have more financial options when they become adults.”

To help parents get their children off to a good start in life, the JPMorgan Share Plan offers an easy and flexible way to invest directly in its nineteen investment trusts, 15 of which are ahead of their benchmark over 12 months. Parents can use the Share Plan to create and build their own balanced portfolio of investments covering the world’s leading stock markets, from the UK, Continental Europe, the US, Asia, Japan and emerging markets.

Saunders Watson concluded: “Feedback from parents, grandparents, and other members of the extended family, tells us that saving for children is a major talking point. The relevant issues of most concern to people are when and how to start saving for the children in their lives. We have a wealth of experience as the UK’s leading provider of investment trusts and are equipped to help parents navigate their way through the investment decision-making process.

“The recent news about global market volatility is a timely reminder that investors are generally better off investing on a monthly basis rather than by investing lump sums on an ad-hoc basis. Markets do rise and fall, therefore a parent who puts away from as little as £50 a month for their offspring - or less than the cost of a coffee each day - will not have to worry about trying to time the market, especially in an unstable period.

“The important thing for parents to remember is that it’s never too late to start saving regularly, regardless of whether their children have had a bonus gift with CTFs. The power of compounded regular saving is ultimately what will give them biggest headstart in adult life.”

For more information on JPMorgan Asset Management’s range of investment trusts visit jpmorganinvestmenttrusts.co.uk.