According to Liverpool Victoria, an estimated half of child trust fund vouchers will be invested in a cash deposit account, which is bad news for both children, and providers of stakeholder and non-stakeholder child trust funds.
It is believed that despite the low interest offered on cash deposit accounts, they will attract parents because of their simple, no-risk formation. The value of their 'nest-egg' will be significantly less than if in other forms of child trust funds, and would provide limited opportunities when the child reaches maturity.
These funds were launched so savings could be made over 18 years, and could pay for such things as university, or a deposit on a house. In a deposit account, with inflation eating away at the money, the low interest provides very few investment opportunities at all.
Our view
If people do not like taking a degree of risk then that is there choice. It is a known fact by most the greater the risk the greater the risk of growth but also the greater the risk of collapse. Perhaps people are more senstive given volatile markets over the last few years, and rightly so.