Don't leave the CTF savers stranded

By TONY HAZELL FOR THE DAILY MAIL
Updated:

 

It was inevitable that child trust funds would be abandoned as soon as a government with a modicum of financial responsibility took charge of this country's ailing finances.

However, the parents and grandparents of 6m children who already have money committed to these funds deserve better than to be cast aside.

Some parents have given as much as £7,000 to a child trust fund. Others have made smaller, but just as meaningful, contributions.

In all, more than £2bn is washing around in them.

Now, there is a real danger this money will be trapped in investment funds that will condemn them to a decade or more of under-performance. Those who opted for cash savings accounts may well be left earning 1% or less. Why? Because they are closed to new investors, so those running them do not need to attract new business.

It is quite understandable, given the state of the economy, that the Government acted in haste to stop its contributions to child trust funds. And the idea of a Junior Isa to replace them is welcome.

But the Government has a duty to those who still have child trust funds. Already, the choice of investment funds has been slashed to just 23 and the number of savings accounts available cut to 11. When the previous government scrapped TESSAs and Peps it eventually made the sensible decision to merge them with Isas.

Now, this government should make the equally sensible decision to merge child trust funds into the new Junior Isa. This would give parents and children greater choice over investments and allow them to seek better returns and lower charges.

›› Time to help 6m kids with £2bn in CTFs

Bitter ending

Just as one generation of savers is about to be abandoned by the Government and investment industry, another approaches the conclusion of that sorry journey.

The number of people retiring on a with-profits pension will soon be in decline. And thank goodness for that.

Many set out in the late 1980s, on the back of financial deregulation, believing government and industry assurances that regular monthly saving into a with-profits fund would lead them to financial security in retirement. Instead, everybody has got rich except them. The financial advisers who sold the plans earned sacks of commission. Insurance companies became bloated on their charges. Fund managers and marketing men took their share.

But those who actually worked for the money and invested it were systematically fleeced.

Money Mail has campaigned vigorously for more transparency in fund charging and for across-the-board reductions in charges. We continue to believe that this is the only way to prevent the next generation suffering a similar fate.

›› Pension payouts slump by a third

Bravo NFU!

Congratulations to NFU Mutual for its open, honest and fair behaviour towards its investors.

While others have delivered poor returns and still gathered their profits, this mutual insurer has taken its share of the pain.

Its Mutual Deposit fund has been delivering poor returns of late, thanks mainly to low interest rates. While others have whinged and made excuses but continued to rake in their fees, NFU Mutual has chosen a different route.

It has written individually to investors telling them it is cutting its annual management charge. Its logic is that the charge is currently greater than the interest rate, so investors will inevitably lose money. While this remains the case, it will reduce the charge.

That's a lesson to every investment house in how they should behave, and its directors deserve every bit of praise that comes their way for taking this brave and refreshing decision.

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