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Cash CTF returns outshine stakeholder

Cash CTF returns outshine stakeholder

Category: Savings

Updated: 13/05/2009
First Published: 13/05/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Cash child trust funds(CTF) have delivered better returns than their stakeholder counterparts since the scheme was introduced four years ago, according to new research from Investment Life & Pensions Moneyfact.

Parents who invested just the Government's initial £250 voucher into a cash CTF back in April 2005 will now on average have seen their child's fund grow to £310.

By comparison, those that favoured a stakeholder CTF will have seen their fund shrink over the same period to £232. Overall, it means the average stakeholder CTF is now worth a quarter less than the average cash CTF.

Controversy has surrounded the Government's decision to allow cash as a permissible investment ever since CTFs were launched because over long periods of time, the real value of cash can slowly be eroded by inflation.

However, despite the apparent setback for stakeholder, Richard Eagling, editor of Investment Life & Pensions Moneyfacts, believes the disappointing figures should prove to be a blip, and also demonstrate the advantages of cash investment during times such as now.

"Whilst no-one would advocate investing in a cash CTF over the full 18 years, these figures demonstrate the important role it can play as a temporary safe haven during periods of market volatility.

"Although the stock market turmoil has meant disappointing returns for stakeholder accounts so far, the long term nature of the child trust fund should ensure there is plenty of time for a recovery.

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