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

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

    SThree: Trainee Recruitment Consultant

    competitive: SThree: Are you passionate about sales?Do you have a keen interes...

    Recruitment Genius: Loan Adviser - OTE £30,000

    £17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    Day In a Page

    Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

    Greece referendum

    Greeks say 'No' to austerity and plunge Europe into crisis
    Ten years after the 7/7 terror attacks, is Britain an altered state?

    7/7 bombings anniversary

    Ten years after the terror attacks, is Britain an altered state?
    Beautiful evening dresses are some of the loveliest Donatella has created

    Versace haute couture review

    Beautiful evening dresses are some of the loveliest Donatella has ever created
    No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

    No hope and no jobs in Gaza

    So the young risk their lives and run for it
    Fashion apps: Retailers roll together shopping and social networking for mobile customers

    Fashion apps

    Retailers roll together shopping and social networking for mobile customers
    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate