Child savings set for boost in the new year

Posted in: Research Last updated: 16 Jan 2008

Good intentions at the start of the year could give children’s savings a boost if last year is anything to go by, according to new research from engage Mutual Assurance.

With January traditionally seen as a time of year for getting finances in shape, data from one of the UK’s leading Child Trust Fund (CTF) providers shows that January last year was the most popular month of the year for parents to open CTFs.

engage Mutual, which provides Child Trust Funds to around 150,000 British children, found that, of CTFs opened with engage Mutual over the last 12 months, almost 12% were opened in January, possibly as parents reviewed their finances far more than the monthly average for the rest of the year. The number of parents opening a CTF in November almost halved in comparison with January suggesting that good intentions perhaps waned as the year went on.

other 2007 child investment trends:

  • regular top-ups not a New Year habit: Despite January being the most popular month to open a CTF with engage Mutual, it came middle of the league in terms of the proportion of CTFs opened with regular monthly top-ups. The highest proportion of CTFs with a direct debit was opened in June.
  • one off top-ups at bonus time: The most popular month for one-off payments to be made into an engage CTF was March, when many workers receive bonuses at the end of the financial year.
  • 2007 up on 2006 for top-ups: Overall the amount of people topping up children’s CTFs in 2007 increased by 40% from 2006, showing that the appetite for saving for the nation’s children is growing.

Karl Elliott, 3GB spokesperson for engage Mutual said:

“New Year is a time when many of us resolve to sort out our finances. As last year’s experience in our CTF data shows, many parents will also open a CTF in January. However, we really encourage parents to invest little and often for their child for the long term, not just at the beginning of the year. By investing just £10 a month into an engage CTF on top of the government’s contribution of £250 at birth and again at age seven,the child could get back £4,130 when they reach 181 “

1Assuming the savings growth was 7%

engage Mutual Assurance CTF product information

  • the stakeholder CTF is an equity product that initially invests in the engageInvestment Growth Fund
  • the engage CTF has built in life styling once the child reaches 13 the money is gradually moved into the engage High Income Fund so that by age 18 the money will be completely switched into this lower risk fund
  • the projected value of £4,130 assumes life styling with 7% annual growth. The fund is forecast to be £4,360 without life styling. The child could get back more or less than this. The projections are based on a child aged 1 at outset, an initial payment of £250 and an additional payment of £250 at age seven. Assume monthly contributions start at age 1 and continue until 18
  • please note this is a stockmarket-linked investment and its value can fall as well as rise. The child may get back less than has been paid in
  • the annual charge is 1.5%
  • the minimum contribution is £5
  • the child’s cash lump sum payout at the age of 18 will depend on investment performance, and cannot be guaranteed
  • the value of the child’s savings can fall as well as rise and they may not get back as much as has been invested for them
  • once money is paid into the CTF, it is “locked in” and can be accessed only by the child and not before they reach age 18, except as permitted by CTF regulations
  • the tax treatment of CTFs may change in future
  • although our CTF account is a Stakeholder CTF which meets certain Government standards, this does not mean that the investment is suitable or that its performance is guaranteed
  • we do not give advice on investments, in the case of doubt as to the suitability of this product independent advice should be sought. Such advice may involve a charge.

engage Mutual Assurance can be contacted on 0800 169 4321 or by visiting www.engagemutual.com

The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.

notes to Editors:

  1. the research is based on engage Mutual internal data from a base of 150,000 customers
  2. engage Mutual Assurance is a trading style of Homeowners Friendly Society (HFSL) and it’s wholly-owned subsidiary engageMutual Funds Limited (EMFL)
  3. engage Mutual Funds Limited (EMFL) is the provider of the engageChild Trust Fund
  4. engage supports mutuality, friendly societies and the regional financial services industry through links with the Association of Mutual Insurers, the Association of Friendly Societies, Mutuo and Leeds Financial Services Initiative
  5. established in 1980, Homeowners Friendly Society Limited (HFSL) is Registered and Incorporated under the Friendly Societies Act 1992, Reg.No.964F, it’s wholly owned subsidiary engage Mutual Funds Limited (eMFL) is Registered in England No 3224780. Both are authorised and regulated by the Financial Services Authority (FSA)
  6. Homeowners Friendly Society Limited’s FSA Register number is 110072 and engage Mutual Funds Limited’s FSA Register number is 181487. You can check this on the FSA’s Register by visiting the FSA’s website www.fsa.gov.uk/register or by contacting the FSA on 0845 606 1234.