Parents still sticking to cash CTF’s

Cash Child Trust Funds (CTFs) continue to dominate Stakeholder accounts in popularity, according to research issued by Abbey Savings to coincide with the two year anniversary of the launch of the Child Trust Fund. Abbey is one of the top CTF providers in the UK.

Parents who chose to invest their CTF voucher opened twice as many cash CTF (non-stakeholder) accounts versus the investment-based stakeholder account at Abbey. However, the total number of stakeholder CTF accounts increased significantly in 2006, following the Government’s allocation of unused vouchers into stakeholder accounts

The research demonstrates the ongoing propensity for parents to open cash CTF accounts, and the importance of the Government in persuading people to invest in equity-based accounts.

Pak Chan, Head of Savings Marketing at Abbey, said: “It remains a concern that many people do not opt for the benefits of long term investment in equities. Over the longer-term, equity based investments have consistently outperformed cash and it should be kept in mind that an average CTF will be held for 18 years

“It is also worth considering that stakeholder CTFs offer a “lifestyling approach”. This means the CTF is gradually moved into lower risk investments as the maturity date approaches, to protect against potential market fluctuations.”

Abbey offers two CTF options. Abbey’s Stakeholder CTF invests in a basket of UK Equities, International Equities and Fixed Income Securities. The CTF adopts a lifestyling approach where the account moves into lower risk savings investments as it approaches maturity to reduce risk of market volatility.

Abbey’s Non-Stakeholder CTF is a cash savings account. It offers competitive rates of 5.25% per cent on balances of £750 and over, and 4.75% per cent on balances of between £1 and £750.