What to do with your child trust fund vouchers

What to do with your child trust fund vouchers - at Moneyweek.co.uk - the best of the week's international financial media.

Parents who want to put their child trust fund (CTF) vouchers to work as soon as possible need to make up their minds how to do so by the 6 April launch. When deciding where to put the money (£250 for each child born since September 2002, plus up to £1,200 per year in the form of top ups from relatives or friends), parents have three choices: a cash deposit account; a stakeholder' equity fund with charges capped at 1.5%, which switches to less risky investments once the child reaches 13; and a share-based fund with higher costs, but which can stay fully invested in the stockmarket throughout. The decision should be a no-brainer. According to Barclays Capital, cash only produced a better return than shares in one period of 18 consecutive years during the last century. Unfortunately, surveys reveal that as many as nine out of ten parents are planning to go for the cash option.

For those who are more sensible, what's available? At the latest count, there were 92 firms offering CTFs, of which Foreign & Colonial is the only pure fund management firm. Thankfully, there are some good fund managers hidden behind some of the other companies, which range from building societies to financial advisers. One "overlooked gem", according to Citywire, is the Walker Crips Stockbrokers offering, which allows discounted access to its range of three unit trusts, all run by Jan Luthman and Stephen Bailey, who have the maximum Citywire AAA-rating for their "first-class risk-adjusted performance". Active investors might prefer to use Comdirect's Self-Select Shares scheme, which lets you invest in any fund or quoted share. The only charge levied by Comdirect is a £12.50 transaction fee for trades, although investors will have to pay all the usual fees on funds, rather than the discounted CTF rates.

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