Norwich Union and The Childrens Mutual are the first providers to actively start developing Child Trust Funds, following the Government's announcement to introduce them.
The administration and development of the product are being shared between the two providers in order to stay within the 1.5% per annum charge cap and still be able to make a profit.
It seems that Stakeholder Pensions have taken their toll on providers' coffers and they are keen not to make the same mistakes again.
Our View
As many people will now know, any child born after 1 September 2002 will get a voucher worth £250 for investment into a Child Trust Fund. Those families receiving the Childrens Tax Credit will receive £500.
We believe that whilst the Child Trust Fund is a good idea in principle, in practice the £250 or £500 may be put into an account and left. Where the money is invested will dictate the returns and if the money is just left for 18 years without checking performance, many children coming of age could be very disappointed.
We believe that the Child Trust Fund will need reviewing regularly and switching, if alternative investments are available.