The Government's plans for the new Child Trust Fund to be linked to equities could push Building Societies out of being able to offer them. The Child Trust Fund will be available from April 2005 and money can be invested through a number of methods including cash, stocks and shares (equities) and unit trusts. The problem is that if a building society only wanted to offer a cash based Child Trust Fund, they would not be able to because an investor could not link their money to equities.
Our View:
The proposed Child Trust Fund is fairly up-in-the-air at the moment and the Government's current proposals are likely to change. If the Government want to reach as many savers as they can to make these funds a success, imposing too many stipulations is bad news. Many investors will only look to invest in cash based accounts, despite the money probably being invested for 18 years or more. The Government needs to realise this fact and use the knowledge to their advantage. To encourage saving, the Government must understand what the majority wants.