Child Trust Funds are 2 years old

CTFs are celebrating their second anniversary this week, with F&C options among the very top performers since launch. For example, a £250 investment in the best selling Foreign & Colonial Investment Trust two years ago would now be worth £374 while the F&C Global Smaller Companies trust would have climbed to £412. Returns on these trusts are significantly higher than either Stakeholder CTFs, which represent over 70% of accounts open so far, or cash CTFs which represent more than 20% of the market.

“Investment trusts are ideal investments for CTFs which are after all 18-year schemes,” said Jason Hollands of F&C Investments. “While shares can be volatile on a short term basis, a key principle of investment is that there is a relationship between risk and reward and that over long time periods it is appropriate to take on more risk.”

“Stakeholder CTFs have attracted the bulk of money but parents are wrong to assume that these necessarily represent best value for money just because they have a charge cap. The costs on many investment trusts are significantly lower than most Stakeholder CTFs which are charging the maximum 1.5% annual management charge allowed.”

“Over time the real measure of success for CTFs will not be the number of government vouchers issued, since at £250 these will only make a modest contribution towards costs such as university fees, but the extent to which CTFs are topped up by additional cash from parents or guardians. In this respect, there is a still much to be done to encourage a savings culture,” concluded Hollands.