The statistics from Investment Life & Pensions Moneyfacts have found that in the last five years, cash Child Trust Funds have overtaken stakeholder CTFs when it comes to growth.

However, Moneyfacts is reminding potential investors that the stakeholder CTFs – which are the Government’s preferred mode – are stock market linked, and that the recent fall reflects the market volatility being inflicted by the recession.

Commenting, Richard Eagling, editor of Investment Life & Pensions Moneyfacts, said: “Whilst no-one would advocate investing in a cash CTF over the full 18 years, these figures demonstrate the important role it can play as a temporary safe haven during periods of market volatility.

“Although the stock market turmoil has meant disappointing returns for stakeholder accounts so far, the long term nature of the Child Trust Fund should ensure plenty of time for a recovery. Indeed there are signs that their performance is starting to improve, with stakeholder funds up eight per cent already this tax year.”

Speaking of the statistics, David White, chief executive of Child Trust Fund provider The Children’s Mutual, said: “Parents should not make any rash decisions and should stick with these investments.

“The market has fallen, but the only way of turning this into a loss is by coming out now and moving the CTF into cash. What’s the alternative – that we don’t save for our children’s future?” he asked.

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