For Immediate Release: Tuesday 24 July 2001

AUTIF CALLS ON GOVERNMENT TO ALLOW
 CHILD TRUST FUNDS TO INVEST IN EQUITIES 

AUTIF has submitted its response to the consultation paper ‘Savings and Assets for All’, published by the Government in April this year.  Its key points are as follows:  

1. The Government should allow Child Trust Funds to be invested in equities, since this is likely to deliver the best long term returns.   Unit trusts and OEICs are ideal vehicles for this.
2. The Government is urged to resist any calls for a 1% charge cap.  Child Trust Funds offer far fewer potential economies of scale than other CAT standard products.  
3. The scheme would be greatly enhanced if a limited degree of income tax relief were available on additional contributions, e.g. by parents and grandparents.  It is suggested that, to provide equality of treatment, this should also be available for corresponding payments to children born before the start of the scheme.

4. Given the relatively modest sums involved, and the costs of handling collective investments, it is essential to keep the administration of the scheme as simple as possible.  (See Notes to Editors)

Dick Saunders, Director General of AUTIF, commented:

“We welcome the Child Trust Fund proposals as an important initiative with potentially far-reaching implications.  Several of our member firms are exploring the development of appropriate products.  We now call on the Government to ensure the scheme is designed in such a way as to enable equity-based funds to participate, thus giving access to the benefits of long term equity investment.

Dick Saunders, Director General, AUTIF, 020 7831 0898
Anne McMeehan, Director of Communications, AUTIF, 020 7831 0898
Clare Arber, PR Manager, AUTIF, 020 7831 0898

Notes to Editors:

The Association of Unit Trusts and Investment Funds (AUTIF) is the trade body representing the UK unit trust and investment funds (mutual funds) industry.  Its members are responsible for more than 99% of the industry’s funds under management.

The Consultative Document “Savings and Assets for All” was published by HM Treasury in April 2001.  It made two principal proposals:

• Child Trust Funds, an endowment to be given to every child at birth, maturing at age 18 or 21;
• The Saving Gateway, under which saving by low income individuals would receive a matching contribution by government.

AUTIF’s response focuses on the first of these.  It also includes a number of practical suggestions for reducing complexity.

• The administration of the scheme should be based around the systems of the Child Benefit Centre

• The trust funds of siblings should be capable of aggregation in order to allow administrative economies of scale.

• There should be a single endowment amount, irrespective of income

• The full endowment should be made at birth, rather than holding part of it back.

• Any means test should be the responsibility of Government not the provider.

• Providers should be allowed to set minimum limits on individual transactions of no more than £100.

• There should be no restrictions on how the proceeds are used when the fund has matured.

• Funds should be placed in an ISA wrapper for ease of administration.

(Response)
(Appendix 1- Saving for Children Factsheet)
(Appendix 2 - Long term relative performance of equities and deposits)
(Appendix 3 - Child Trust Funds: Proposals)