Majority favour adopting an aggressive outlook for children’s long term savings, poll indicates

News - Savings

Written by Ray Clancy

Thursday, 09 September 2010 08:07

The majority of investors favour taking an aggressive strategy when saving for children, a new survey shows.

More than half of investors would take an aggressive stance, investing mainly or wholly in equities, when investing for a child over an 18 year timeframe, the latest research from F&C Investments has found.

There is a total lack of support for ultra conservative cash only investments with some 52% of respondents saying they would invest mainly or all in equities, perhaps in higher risk areas like emerging markets.

A further 21% favoured a multi asset approach, using asset classes like property, commodities and gold alongside equities, bonds and cash. A balanced strategy, with exposure to both bonds and equities, perhaps with a cash element, was the choice of 23%, while 4% favoured a cautious approach, mainly in cash and bonds, perhaps with some equity exposure.

The results of this poll were at odds with those of a survey conducted among the wider public by F&C in May, which found that 58% of parents did not want to risk the value of their children’s investments going down at all.

Jason Hollands, F&C’s head of corporate affairs, pointed out at the time that parents’ reluctance to take risk with their children’s investments meant they could be missing out on the chance of superior returns.

While returns from equities and other risky investments are by no means guaranteed, the respected Barclays Capital Equity Gilt Study 2010 shows that in every 18 year period from 1960 to 1978 to 1991 to 2009, the real, that is, after inflation, return on shares was positive, with a £100 investment growing to between £125 (1961 to 1979) and £1,072 (1974 to 1992).

Investing for children is in the spotlight with the reduction in value of Child Trust Fund (CTF) vouchers for children born from August 02, and the withdrawal of the vouchers from the end of 2010.

F&C said it offers a Children’s Investment Plan giving access to the same wide range of investment trusts as its shares CTF, but without the restrictions on contributions and withdrawals. But such plans do not enjoy the same tax advantages as a CTF.

‘It is encouraging to see the respondents to this survey keeping faith with the idea of long term investing in risk assets. The past decade has been a tough one in the equity markets, but with interest rates at an all time low and the prospect of inflation picking up, investors are wary of the potential for value destruction in cash,’ said Mike Woodward, head of investment trusts at F&C Investments.

‘Most of all, we hope that the demise of the Child Trust Fund scheme will not dent the future financial prospects of a new generation of children. The research we carried out earlier in the year suggested that parents had saved for their children before the Child Trust Fund arrived, and would continue to do so after it had gone,’ he added.