Child Trust Fund will save young adults from sea of debt
Leading Child Trust Fund provider The Children’s Mutual comments on George Osborne’s suggestion to limit the Child Trust Fund to the poorest third of families.
David White, Chief Executive of The Children’s Mutual, said: “We’re surprised and disappointed by Mr Osborne’s statement today. If it is the intention to create a savings culture in this country we must preserve the Child Trust Fund for all families.
“Research suggests that this is the one thing that is really getting savings moving again. In this period of record indebtedness the Child Trust Fund has become the savings vehicle of choice for families looking to provide a better future for their children1. Quite clearly this would reverse that trend. We are reporting record opening of savings accounts and overall increases in saving. We believe the evidence shows that this is the most successful savings product ever.
“The Child Trust Fund has trebled the savings rate for children by families.2
“More than two million parents are using the CTF to make monthly contributions3.
“Amongst our customers those contributions have risen by 60% from £15 to £244.
“Many of today’s young adults are drowning in a sea of debt and are further away than ever before from being able to afford education, to get on the property ladder or advance themselves.
“We predict that if, on average, £0.5 billion is being invested each year in Child Trust Funds this would result in an anticipated £2.4 billion5 being available to young adults which would make a huge difference to the Nation’s level of indebtedness.
“We need to pull future generations from the sea of debt. Removing the most successful savings initiative ever at this juncture will condemn the young people of the future to the same fate as today’s generation.”
 According to research by The Children’s Mutual showing pre CTF long term saving rates fro children of 18% vs 56% TCM CTF DD rate at end Sept 2009.
 Calculated from industry wide opening rates and DD rates which show that 1m CTF accounts receive regular savings.
 Average of £15/m saved into TCM Baby Bonds prior to the advent of the CTF against a current monthly TCM CTF DD level of £24.
 This projection is calculated on the following assumptions based on figures from TISA June 2006 and HMRC:
1. 69% of CTFs receive £250 voucher at 0 and age 7
2. 31% of CTF receive extra £250 at 0 and 7.
3. 23% of CTFs receive an average direct debit of £21.20 from birth
4. 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 in a stakeholder CTF account. We’re assuming an investment return of 7% a year, and charges of 1.5% of the CTF account value each year. The projected values aren’t guaranteed because the value of shares goes up and down. So the final payout could be more or less than this