The thousands of parents who’ve not yet activated their Child Trust Fund vouchers since the launch of the government scheme in Feb 2005, may be interested in research from Engage Mutual Assurance. This research investigated parental contributions to Child Trust Fund accounts, and the perceived impact of Child Trust Funds on young people once they reach 18.
Spurred on by official figures released by the Inland Revenue*, which indicate that £271 million of Child Trust Fund vouchers are still unclaimed by 42% of eligible parents, Engage is urging families to set aside time to consider where they want to invest their voucher, and how, so they can make an informed choice for their child.
In the midst of criticism about the scheme from the media, Engage is also sharing information with parents about how to overcome common concerns about the Child Trust Fund. Since their customers demonstrated a 65%** preference in favour of on-line applications, Engage believes that the net is proving particularly successful in helping parents to open accounts.
Key Points For Busy Parents
Many detractors feel the scheme could be experiencing a slower take-up than expected for a number of reasons – including the lack of parental confidence in selecting from the products on offer, the varying levels of risk and potential reward, difficulty completing forms, lost vouchers, time constraints, general apathy and concerns about how the money would eventually be spent.
Karl Elliott, Marketing Director at engage, commented: ‘It can seem confusing at first, but parents should remember that when you open a Child Trust Fund account, it doesn’t have to be an 18-year long commitment to a particular provider. Of course, if you’re confident you’ve selected the right provider, then great – but if you’re not happy, you are able to change your mind at a later stage.’
Engage has also developed some key points for busy parents, who may be uncertain about how to claim the money their family is entitled to. These hints apply no matter which provider you choose:
- ACT NOW – other families have already opened Child Trust Fund accounts for their children, so why miss out? Using your voucher today will allow you to put your child’s voucher to work right away
- NET BENEFITS – the internet lets you research your options, and put your knowledge into practice, immediately by applying on-line. and over two-thirds** of Engage’s customers applied in this way. The government helpline www.childtrustfund.gov.uk is also an invaluable source of information on lost vouchers, changes of address, CTF products, CTF providers and other child savings accounts
- PHONE-A-FRIEND – asking friends and family for advice could help you to make your decision based on information from a source you know and trust
- BE FREE – you’ve been given the option to make a positive contribution to your child’s financial wellbeing, so don’t delay, or the Inland Revenue WILL invest the voucher for you with an allocated provider
- CLAIM CHILD BENEFIT – not many people know that you need to have been awarded Child Benefit to get your voucher. Do this as soon as possible so your voucher can be released.
In addition to making a decision about opening an account, Engage also investigated longer-term opinions of the Child Trust Fund. In its survey, over a thousand parents of children under 14 were questioned about the spending that would cause them most concern, were their child to receive a lump sum from the Child Trust Fund:
- 28% of parents were concerned about spending on partying and drinking
- 23% didn’t want their child to buy a motorbike
- 19% worried their son or daughter would be tempted by cosmetic surgery
Despite these concerns, 70% of parents strongly or slightly agreed that having a lump sum paid at 18 would have a positive impact on their child’s life. 65% also strongly, or slightly, agreed that Child Trust Funds will encourage parents to save for their children’s future.
Reap The Rewards
There is also overwhelming evidence to suggest that parent’s hard work planning the investment won’t go to waste, following responses from over a thousand youngsters aged between 17 and 19, who were asked about how they’d spend or invest a lump sum. Results indicated that efforts now are likely to reap rewards for the future and that parental concerns about Child Trust Funds being spent inappropriately are unfounded.
61% of the youngsters overall chose to spend their money on options which appeared in the parent’s preferred top four; including paying for further education, saving for a rainy day and buying a car. 11% said they would spend the money on themselves, 8% would use it to fund a gap year, 5% to invest in property and 5% on partying and holidays.
The youngsters surveyed also said that up to £5000 would make a difference to their life now.
The favourite choice of what to spend the money on among parents, was funding further education, with 56% of parents in favour of this option. The most popular option voted for by 25% of the youngsters surveyed, was saving for a rainy day.
Karl Elliot added: “Implementing an initiative such as this always throws up challenges, but we need to remember the 987,511* children who have had accounts opened on their behalf. These figures are extremely positive – that’s nearly half a million children with something put away for their future. Our survey also showed that despite parents concerns, 58% of parents were willing to make additional contributions to the account, even though they had no control over how it would eventually be spent. At Engage we’re working hard to promote financial capability and we feel the Child Trust Fund is the first step towards empowering young people to take control of their money and future financial security.”
Source stats: Research commissioned for Engage Mutual Assurance by Brahm research, Feb ’05 (power point available on request)
* http://www.hmrc.gov.uk/stats/child_trust_funds/child-trust-funds.htm 20th September 05
** Engage MI figures