Irony of Children’s Mutual kicking out its children

I have never held much of a candle for child trust funds. When they were launched I believed that they were a waste of taxpayers’ money.

The government was borrowing money to pay to children who would eventually foot the bill themselves through higher taxes. My view has not changed.

Having said that I am increasingly angered by the appalling manner in which this government appears prepared to cast CTF savings on to the scrapheap.

With the launch of the Junior Isa, the sensible and fair option would have been to merge the two providing flexibility and wide-ranging investment opportunities to the 6m children holding a CTF.

Instead CTF holders have been locked into a ghetto which is being squeezed ever tighter.

The most successful CTF is run by The Children’s Mutual. The former Tunbridge Wells Equitable Friendly Society managed to open an astonishing 927,000 accounts.

The Children’s Mutual was also highly successful at encouraging parents to top up these nest eggs – 35 per cent of accounts have a direct debit topping up the savings by an average £27.26 a month.

But now, like so many battery hens, these children and their savings could be packaged off to Forester Life.

There is a certain irony in The Children’s Mutual wanting to kick out its children. What will be its next incarnation – The Childless Mutual or The Empty-Nester Mutual perhaps?

Neither the children nor their parents will have a vote on this pivotal decision. Why? Because the children are not members of The Children’s Mutual; irony heaped upon irony.

Like the with profits customers who were shunted from one insurer to another in the 1990s and early 2000s, these children must take it or lump it.

So what are they being sent to? Forester Life has an extremely vocal group of supporters in the IFA community.

But what can bring about such fierce loyalty? Is it the outstanding fund performance?

The Forester Life CTF is invested in its Stakeholder Managed Fund 1. According to Trustnet figures on July 17, it has returned 15.64 per cent in the past five years, compared with a fall of 0.97 per cent for average in the Flexible Investment sector.

However discrete annual performance delivers a more mixed story. The fund has underperformed its peers in three of the past five years – the exceptions being 2008 and 2011.

And in the year to date it has returned 3.12 per cent against 3.74 per cent for its sector.

Five-year cumulative performance is obviously the key figure for those who have been with it since the start.

But discrete annual performance can mean more to prospective investors. This reveals whether the performance has been consistent or based on a couple of lucky or inspired guesses.