Investment firms reject child funds

The UK's largest fund managers and life insurers have snubbed the Government's Child Trust Fund scheme, leaving high street banks poised to pick up most of the business.

The UK's largest fund managers and life insurers have snubbed the Government's Child Trust Fund scheme, leaving high street banks poised to pick up most of the business.

The scheme, which launches next April, will see every child given £250 or £500 at birth, which the Government hopes will be invested in a "stakeholder" equity-based fund.

However, the major life insurers and fund managers have decided not to offer the product because the amounts of money involved will not make it worth their while. Furthermore, the Government has imposed a cap on charges of 1.5 per cent a year, which the industry says is too small given the sums involved.

The snub will leave the high street banks, whose investment performance has lagged far behind the specialists in recent years, to pick up most of the business. Mark Dampier of Hargreaves Lansdown said: "I wouldn't touch a bank fund. A lot of people are going to be investing in very poor products and will be very disappointed."