Row breaks out over Child Trust Funds

09 February 2005
Government-sponsored Child Trust Funds have been the subject of a row, with experts offering conflicting advice about them.

The Association of Charted Certified Accountants (ACCA) advises parents to make the most of them, whilst F&C Management brands them "pointless."

Under the child trust fund saving plan any parent or guardian with a child born on or since September 2002 will receive a voucher worth £250 to set up a Child Trust Fund account, with the contents accessible when the child reaches 18.

Up to a maximum of £1,200 can be added each year. Investments are free of income and capital gains tax, and the government will also make a further contribution of £250 or £500 on the child's seventh birthday.

Head of taxation at ACCA , Chas Roy-Chowdhury, advised: "Parents should now be thinking where they will invest the voucher to ensure the best return for their child."

"It is also important to remember that money in a Child Trust Fund will grow significantly if parents, other relatives and friends keep adding to it," he added.

However, F&C Asset Management has branded Child Trust Funds a waste of time.

It believes they are of little value as long-term investment vehicles because they actively avoid any stock-market exposure.

The director and head of communications at F&C, Jason Hollands, said: "People may shy away from investing in equities because of the perceived risks involved, but the CTF is not a short-term savings scheme.

"Parents should be aiming for the best possible returns on their child's £250 - this amount left in a cash account will be barely enough for a round of drinks when the child turns 18," he added.

For advice on investing in your child's future, click here.
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