2020: A new dawn for teens and Generation X
New social issues report predicts a future where the age of home ownership could drop, demands on higher education increase and a new generation of entrepreneurs is born
2020 Vision: The Trust Fund Generation, commissioned by The Children’s Mutual, is being launched on the third anniversary of the first Child Trust Fund (CTF) vouchers being issued. Based on qualitative and quantitative research, among young people and parents, the report investigates what the world could look like in 2020 for the Trust Fund Generation and what the impact of the CTF could be.
It is estimated that from 2020, the year when the first CTF account holders turn 18, their CTF accounts could pay out an estimated £2.4 billion a year. The report investigates the impact of this and predicts a shake up of the property market, a new approach to higher education and the birth of a generation of entrepreneurs. With families of today’s teenagers and young adults feeling the strain financially, the CTF lump sum could transform early adulthood for the Trust Fund Generation.
According to SIRC, a CTF lump sum could re-establish home ownership as a rite of passage for 20-somethings. The research outlines the current state of the property market, with the average first-time buyer today aged 34 and paying out more than £140,000 for their first property. It also shows that 40 per cent of today’s teens believe buying a home will be impossible without their parents stumping up the deposit and that today more than a fifth of men aged 25 to 29 are living in their parents’ home.
But calculations from The Children’s Mutual show that although the average first-time house deposit could rise to £18,800 in 2020, it could be met by a fully topped up Child Trust Fund which may deliver around £37,100. And with the average CTF account currently set for a pay out of £9,500, the Trust Fund Generation could start adulthood with half the deposit for their first home. When asked what they would do with a hypothetical lump sum of £20,000, today’s youngsters ranked buying a house as the third choice after continuing to save, and paying for higher education.
The research also found that it isn’t just the property market that is due a shake up. The UK’s first universal savings scheme could change the face of higher education. According to the report, the CTF could mean that the Trust Fund Generation has the opportunity to leave university and start adult life with a ‘clean slate’ rather than being ‘saddled’ with debt and still tied to their parents’ purse strings. And with 70 per cent of parents polled saying their children wouldn’t be able to go to university without their financial help, the CTF could also be the saving grace for Generation X, according to SIRC.
The report outlines a future where having BA or BSc at the end of your name will not be enough to get ahead in the world of work, and SIRC is predicting that 2020 will mark increasing numbers of students looking to postgraduate study. With students already demanding more from higher education providers now they are paying more than £3,000 in annual tuition fees, it is predicted that universities and colleges will have to up their game to meet students’ requests for value for money.
SIRC is also forecasting a rise in UK entrepreneurs, as 2020 teens reassess how best to start their career. Had the CTF existed for today’s teenagers, the report found that one in five of them would have used the lump sum to start their own business, rejecting higher education in a bid to get ahead. With nearly four million people now self employed in the UK, this could seriously shift the profile of the workforce in forthcoming decades with up to 150,000 youngsters a year taking the entrepreneurial Dragons’ Den approach to success.
David White, Chief Executive of The Children’s Mutual, said: “Economic prosperity, rises in house prices and increases in the number of young people going to university have meant that today’s parents with teenagers have suddenly become the victim of a dramatic and expensive shift in society. Parents of young children need to be aware of the shift and do something about it now.
“Seven out of 10 of today’s children expect to go to university, graduating with a debt of £12,000 and the cost of a deposit for a house rose 450% in the 10 years following 1995. There is no way that today’s children can meet these costs alone when they reach adulthood. Parents realise they need to help but today the only option for many is to borrow to meet the rising costs.
“For parents with children aged five and under, topping up their Child Trust Fund, and inviting grandparents and other family members to do the same, is a potential solution. The report shows that it could protect parents from dipping into their own savings and pension and help children in their 20s and 30s be free of debt and have a greater chance of getting their first foot on the property ladder. For this first Trust Fund Generation receiving a lump sum at 18, combined with the ability to roll it over into an ISA, could help them to manage these pressures more effectively and increase their options in adult life.” This projection is calculated on the following assumptions based on current figures from TISA June 2006 and HMRC:
-69% of CTFs receive £250 voucher at 0 and age 7.
– 31% of CTF receive extra £250 at 0 and 7.
– 23% of CTFs receive an average direct debit of £21.20 from birth
– 6% of CTFs receive a lump sum of £300 in the first year + £80 for every subsequent year.
The projections in these calculations are based on money being invested for in a stakeholder CTF account, with yearly growth at the FSA tax-exempt mid-rate of 7% and charges of 1.5% of the account’s value each year. These figures are not guaranteed, shares can go down as well as up and the eventual lump sum could be more or less than indicated.
 Based on average first-time property purchase of £140,000 and a 10% deposit of £14,000. Assuming inflation at 2.5% a year.
 £37,100 projection based on £100 per month being invested for 18 years in a stakeholder CTF account, alongside the Government’s initial £250 voucher and another £250 at age 7, with yearly growth at the FSA tax-exempt mid-rate of 7% and charges of 1.5% of the account’s value each year. These figures are not guaranteed, shares can go down as well as up and the eventual lump sum could be more or less than indicated.
 Based on the average monthly direct debit into The Children’s Mutual’s stakeholder CTF. These projections are based on money being invested for 18 years in a stakeholder Child Trust Fund account, alongside the Government’s initial £250 voucher and another £250 voucher at age 7, with yearly growth at the FSA mid-rate of 7% and charges of 1.5% of the account’s value each year. These figures are not guaranteed, shares can go down as well as up and the eventual lump sum could be more or less than indicated.
 Based on approx 715,000 CTF vouchers being issued a year http://www.hmrc.gov.uk/ctf/statistical-report-2007.pdf
 Carrick James research commissioned by The Children’s Mutual in Jan 07.
 Nat West Student Money Survey August 2007.
 Social Trends – Office for National Statistics.