Sam Dunn: A bucket of cold water over child trust funds
Sunday 19 December 2004
Hold on tight: the imminent birth of child trust funds will involve some painful labour.
Chancellor Gordon Brown's flagship savings scheme to give every baby delivered on or after 1 September 2002 at least £250 for investment until their 18th birthday goes live in April.
Yet parents soon to be sent the savings vouchers (£500 for the poorest families, earning less than £13,480) face a horribly thin list of companies to which the money can be safely entrusted.
The fund manager Fidelity last week abandoned its plans to launch a child trust fund after its research suggested a lack of demand for what it could offer.
Other big companies, such as the insurers Legal & General and Prudential, had already snubbed the scheme, but Fidelity's announcement was a particular blow since it was one of the most dynamic investment firms to have expressed an interest. Most others committed to providing the funds are banks, life companies and building societies. Among these are Barclays, Liverpool Victoria and Norwich Union.
This general unwillingness to participate is down to money - or rather, the great difficulty in making any.
Dominic Cummings of the independent financial adviser Bestinvest says companies once excited about the plans now simply scratch their heads and wonder if they will work.
An official list of companies prepared to provide the funds has still to be drawn up by the Inland Revenue, and the clock is ticking loudly. Next month, this roll-call of approved firms has to be sent to parents before they receive the vouchers weeks later.
These can be placed either in a cash deposit account or an alternative "stakeholder" fund that will include stock market investment early in your child's life before being switched to less risky assets, such as bonds and cash, three or four years before the fund matures when the child turns 18.
Companies that offer the "stakeholder" option have to cap charges at 1.5 per cent.
A third non-stakeholder fund option carries higher charges but aims for greater growth through riskier stock market investments.
Deciding which of these three options to go for won't be easy for many parents. I fear they will simply take the easy option and dump the money in a basic deposit account. Research from Barclays last month suggested that many low-income parents would open their child trust fund account with a provider they have already dealt with.
But a £250 sum, topped up by a second £250 payment when the child turns seven years old, won't grow into a treasure trove if it's left to accumulate tax-free on its own in a basic account. With modest returns of at least 5 per cent a year, rough estimates suggest it would barely nudge £950.
Although Mr Brown wants to foster a savings culture among poorer families, it's high earners who are expected to benefit most. Children whose parents can afford to invest the maximum £1,200 each year on top of the original £250 sum could come of age with as much as £35,000.
Not all is gloom, though: the supermarkets could yet come through to carry the torch for child trust funds. Sainsbury's Bank is the only one to commit so far but Asda is understood to be interested. If they could take the initiative with the funds as they have with credit cards and savings accounts, the scheme will at least get a kickstart.
It was hardly a message of Christmas cheer. Scottish Widows and Lloyds TSB Life announced last week that they were joining the growing list of mortgage companies to impose a time limit on endowment mis-selling complaints.
From February, some 305,000 mortgage endowment customers will have three years in which to complain if they receive a letter warning of possible shortfalls.
Earlier this year, a Treasury Select Committee hearing highlighted how millions of homebuyers potentially mis-sold an endowment loan had yet to come forward.
This is a timely reminder to look at your policy. If you were mis-sold an endowment, you have a right to compensation.
Crowd-to-let: How crowdfunding sites can give investors a slice of the property market for £500
After the election: What will Britain's financial future look like on 8 May?
General Election 2015: How you vote next week could affect your finances
Social tenants locked into energy tariff for 40 years
Five Questions On: GB Energy's new tariff
- 2 Top Gear: Jodie Kidd, Philip Glenister and Guy Martin 'in advanced talks' to join show
- 3 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 4 University student in court for allegedly covering housemates' food in window cleaner and spit
- 5 Garland shooting: Isis claims attack on Prophet Mohamed cartoon contest in Texas as its first action on US soil
In defence of liberal democracy
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
Schools forced to act as 'miniature welfare states' with teachers buying underwear and even haircuts for poor pupils
Andy McSmith's Sketch: Feisty audience is the real star of an enlightening show
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...
Day In a Page
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings