Adam is already earning

AT THE age of six months, Adam Draper is already making use of his single-person's tax-free allowances, writes Clare Arthur.

Shortly after he was born, his grandfather, Ken Parkhouse, invested pounds 500 on his behalf.

Mr Parkhouse's independent financial adviser, Graham Hooper of Chase de Vere Investments, recommended the Invesco Rupert Children's Fund, one of the few investment funds designed for children.

Although Adam is only six months old he is entitled to the single-person's tax allowances, enabling him to earn capital gains of pounds 6,000 and income of pounds 3,535 each year without paying tax. Until Adam is old enough to start a holiday job, he can claim back the 20 per cent tax paid on dividends yielded by his portion of the fund.

The Rupert Children's Fund invests selectively in the FT-SE 100 index, and its less-than-sparkling performance over the past five years reflects the absence of smaller companies from its portfolio. The fund has produced total returns of 60 per cent, compared with average UK unit trust growth of 81 per cent. However, it has rallied slightly during the past year - producing total returns of 14 per cent compared with 13 per cent for the average UK unit trust.

Mr Hooper argues that the companies included in the portfolio are sound and steady, making them suitable long-term investments. Mr Parkhouse says: "The money is for when Adam reaches the age of 18, so he's got something to get started with."