Child Trust Funds: Moneynet Questions Long Term Viability In Face Of Poor Returns

* Standard CTF schemes set to deliver ‘a measly’ £500 at age 18

* Moneynet asks why National Savings does not offer a CTF

AS the government this week reportedly commits to spending a further £2million to boost flagging interest in Child Trust Funds (CTF), online financial data comparison site moneynet.c

co.uk questions the viability of the initiative and the long term investment value to parents.

“It is hardly surprising that there has been limited interest in CTF’s,” said Moneynet chief executive Richard Brown.

“Our research (see table) shows that the best of the non-stakeholder accounts pays 6 per cent.

“With inflation currently running at around 2 per cent, this means that the true return on the best of these accounts for standard taxpayers is only 4 per cent per annum,” said Brown.

“So at age 18 – when the schemes are due to mature - the value of the fund in real terms will, at best, be a measly £500. And with student debt averaging £13,000 in today’s terms it really appears that there is more hype than substance to this scheme and it’s hardly surprising that it hasn’t captured the imagination of the general public’.

Brown also questions why government run savings body National Savings does not offer a Child Trust Fund Account.

“The government should be putting its money where its mouth is: there should have been an ideal opportunity here for National Savings to really get behind the scheme and offer a market leading account to encourage further saving from parents and grandparents.

“Instead it has been left to the open market with the result that the accounts are little better than can be found in the wider savings arena.”

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Ends

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Best and Worst Child Trust Funds: source Moneynet August 2005

Best CTF Building Soc Accounts If No Additional Deposits Made:

Ipswich
6.00%
Flat variable rate – no conditions

Britannia
6.00%
Guarantees to match Base Rate until 6th April 2010 and includes a bonus of 1.25% for two years.

Worst CTF Accounts If No Additional Deposits Made:

Monmouthshire
4.75%
Guarantees to match Base Rate until 30th June 2010. Additional bonus of 1.25% for two years if £250 + pa credited to account

Leeds & Holbeck
4.75%
Guarantees to match Base Rate until 30th June 2006. Thereafter rate will be no lower than 1%. Additional 1.25% for 2 years if £600 + pa credited to account

About the Author

Moneynet press enquiries

Richard Brown, Chief Executive, 020 8313 9030

Moneynet.co.uk offers consumers a choice of thousands of low cost financial services products. From mortgages, personal loans to motor, home and medical insurance, credit cards, savings accounts and best buy fixed rate products, Moneynet is one of the most comprehensive online services of its kind in the UK.
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