Letter to the Chancellor

1 March 2021

Dear Chancellor

I am writing to you to ask for your consideration on two issues that affect our customers. Firstly, the difficulties that some families face when accessing the child trust fund (CTF) of their vulnerable child. Secondly, the lack of awareness of Lifetime ISAs (LISA) as a savings vehicle that could enable young people to take their first steps onto the housing ladder.

OneFamily is a financial mutual with the third largest membership in the UK and was established as a mutual Friendly Society over 45 years ago. We offer our members investments and protection solutions that meet their needs and those of their families. OneFamily manages £7.5 billion assets and serves 2.6 million customers across the UK. We are one of the UK’s largest CTF providers.

Turning to my first point; for the parents and carers of children who are unable to manage their own financial affairs, accessing their child’s savings when they reach maturity is far from straightforward. This is an issue common to both CTFs and Junior ISAs. These sums are generally small but are often urgently needed to purchase essential equipment in support of the young person.

For those unaccustomed to the legal system, the current process of applying to the Court of Protection is daunting and time-consuming at a time when the parents may also be struggling to manage the complex needs of their child. OneFamily is one of the CTF providers that has supported some families by enabling the release of low-value balances against existing documentation, which may already be held by the parent or carer managing the young person’s affairs. We have seen the real benefits that this has brought to the lives of our young customers. However, this process has not been adopted by all CTF providers and does not have formal assent from the Ministry of Justice. Therefore, this issue needs a Government-led solution, that enables these children to have the same ease of access to their savings as their peers and I would ask that you review this situation urgently.

One of the stated aims of the CTF account was to encourage a lifelong savings habit from a young age. We know from our recent research that long-term security remains a major concern for the 18-30 age group. Thirty percent are saving to put down a deposit on a house, yet this group has also been severely impacted by the pandemic; they are twice as likely as the rest of the population to have been made redundant or need to find additional work to pay their bills. More than half of those we spoke to said that uncertainty, caused by the pandemic, means that they would be more likely to save for their future. In short, they need a savings vehicle that will support them as they save towards buying their first property.

The LISA is designed to meet that need, assisted by an attractive Government backed tax bonus. We are, as a provider, taking active steps to highlight these products and we’ve identified that there is a generation of newly motivated young savers. Yet, take-up is surprisingly low with only 9% of eligible savers owning an account nationally. This is not just an issue of awareness, but also an understanding of the benefits of this long term, tax-efficient investment. Therefore, I believe that the time is right for the Government to support providers by energising the LISA market with a campaign that encourages positive savings behaviours in this age-group. From talking to our customers, we believe that returning the LISA withdrawal penalty to the increased level of 25% would act as a disincentive to saving. Therefore, I would respectfully ask that, when reviewed, the penalty is retained at the lower level.

Yours sincerely

Teddy Nyahasha

CEO, OneFamily