When deciding whether to opt for cash or equity based child trust funds (CTFs) the majority of parents will choose the cash option, new research has found.
According to the Building Societies Association (BSA), 71 per cent of parents who were offered a choice selected the cash CTF this September, with receipts totalling £6.4 million.
To date, 441,000 CTFs have been opened with a total balance of £164 million. However, Brian Morris, head of savings policy at the BSA, suggested that some parents are “unwittingly opting for CTF products that could expose them to a capital loss”.
Adding that this was “worrying”, Mr Morris said that a recent BSA study found 43 per cent of parents did not know which of the CTF types carried a capital risk.
The BSA said it would ask the government to relax the rules so that other lenders can provide cash CTFs in order to meet the demand, which currently exceeds supply.
CTFs are long-term savings and investments accounts for children, with payments made by the government in order for a child to have a stock of assets when they turn 18.
The scheme aims to educate children on the benefits of savings and “strengthen the savings habit of future generations”.
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