Melanie Bien: Let child trust funds play the field on investment

The Inland Revenue released more details last week about the child trust funds to be introduced in less than a year.

Changes to the draft regulations include "allowing a wider range of products to enter the CTF market". But is this the case? The Building Societies Association says the decision to allow providers to offer CTFs only if they already sell equity investments eliminates the many building societies which only offer savings products.

The Government argues that as CTF money will be invested for such a long time - 18 years - it should be in equities as these are likely to generate greater returns than savings accounts. And there's enough time to ride out the ups and downs of the market.

But any investment product should involve choice, particularly one that will be available to so many. And while equities do tend to produce greater returns than cash, not everyone will be happy investing in them.

If parents can't afford to contribute to their offspring's fund, is there any point choosing equities? The state's initial contribution - up to £500 - and a further payment when the child is seven will be eaten into by charges if the cash is invested in equities. A savings account paying a good rate of interest, with no charges, may be a more sensible alternative.

In an ideal world, all parents would invest their child's trust fund allowance in a broad range of equities, regularly adding their own money over the years. So by the age of 18, the child would have access to a sizeable sum to pay for university, buy a car or travel round the world.

But not all 18-year-olds will find themselves in this enviable position; to assume they will is shortsighted.

Trouble in store

Store cards are the latest financial product to attract the attention of the Office of Fair Trading (OFT). And with interest rates likely to rise further this year, the OFT's campaign warning consumers to check terms and conditions before they sign up for a store card is timely.

With typical annual percentage rates (APRs) nudging the 30 per cent mark, store cards should not be taken out lightly. Yet that's exactly what tends to happen, primarily because of the way in which they are sold.

We should check the conditions before we sign up for one, just as we should with any other financial product. But if you've ever been offered a store card, you will know just how difficult this can be.

While shopping last week, I was asked whether I wanted to save 10 per cent on my purchase - a common approach from sales assistants flogging store cards. I declined. But if I had accepted and started filling out a form, it is likely that before long I'd have felt harassed, with a queue of 10 people forming behind me during a busy lunch hour.

The last thing you feel like doing in such a situation is quizzing the sales assistant about late-payment charges and whether payment protection insurance is optional. And it is unlikely the sales assistant would be able to give informed answers.

Handled sensibly, a store card isn't necessarily a bad thing. The initial 10 per cent discount could save you a lot if you are making a substantial purchase that day. And you may get perks, such as further discounts or invitations to exclusive events.

But handled sensibly means clearing the balance at the end of the month. If you don't do this, any initial discount will be swallowed up many times over.

The OFT reveals that 30 per cent of adults have a store card, with 60 per cent of these clearing the balance each month. This is the smart way to use a store card. But the other 40 per cent of cardholders are stung by extortionate rates of interest.

Furthermore, 10 per cent don't have any other form of credit. So they aren't taking advantage of 0 per cent introductory rates on credit cards or cheap personal loans. And given that the standard APR on a credit card hovers around the 10 per cent mark, even when the introductory period has ended you won't be fleeced to the extent that you are with a store card.

Clearly, some educational work is long overdue. For more information, get hold of a copy of the OFT's leaflet, "Are you store card smart?", at www.oft.gov.uk.

m.bien@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
politicsIs David Cameron trying to prove he's down with the kids?
News
Businessman at desk circa 1950s
news
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Client Services Manager - Relationship Management - London

    £30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

    Recruitment Genius: Credit Controller / Customer Service

    £18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

    Guru Careers: In-House / Internal Recruiter

    £25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Day In a Page

    Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

    Auschwitz liberation 70th anniversary

    Woman sent to three Nazi death camps describes surviving gas chamber
    DSK, Dodo the Pimp, and the Carlton Hotel

    The inside track on France's trial of the year

    Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
    As provocative now as they ever were

    Sarah Kane season

    Why her plays are as provocative now as when they were written
    Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

    Murder of Japanese hostage has grim echoes of another killing

    Japanese mood was against what was seen as irresponsible trips to a vicious war zone
    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea