Now that the new government has announced the demise of the state supported Child Trust Fund (CTF), what are the alternatives for parents who are still keen to put cash away for their little ones?
Previously awarding each and every child in the UK two vouchers of £250, CTF payments will be reduced as from August and be completely axed at the end of the year – but if you’re locking away money for 15-20 years there are loads of viable options still available on the market.
Offshore Personal Savings
Easy access and fixed term offshore savings accounts generally offer low or tax free conditions, easy access and higher rates of interest. The later generally offering a better rate of return for the saver – perfect for long term investments.
There are a few high street lenders in the market who offer products aimed specifically at investments for children. These are great because they tend to deliver on key areas such as control and beneficiary, but if the investment is intended to be long term, any saver would do well to compare returns, terms and conditions with other non-child packaged products on the market.
These fall under bare, unit and investment trusts, all of which are opened in a trustee’s name on behalf of the child. Unit trusts are a type of ‘pooled investment’ – a fund manager buys shares in a range of different companies and pools these in a fund; you then buy ‘units’ in the fund. Investment trusts invest in the shares of different companies, allowing investors to spread their risk. The main difference from unit trusts is that investment trusts are themselves companies in which you buy shares. Unlike unit and investment, the trustee’s of bare trusts are simply nominees and must act according to the beneficiary’s instructions.
A long term investment ISA is a great option if you’re planning to lock money away for a long period, and despite recent watchdog revelations in the media about low paying ISA’s, there are still a few choice products on the market that offer up to 5% return – plus they’re tax free. If you want to play with your money, cash ISA’s offer excellent tax-free annual returns.
National Savings & Investments
Backed by the HM Treasury, National Savings and Investments (NS&I) are one of the largest savings and investment providers in the UK and offer 100% security. Alongside Premium Bonds, NS&I offer a variety of products, including index-linked and fixed-interest savings certificates, children’s bonus bonds, direct ISA and investment accounts.