Child Trust Funds receive over GBP5 million a week
6 April 2010 marks fifth anniversary of the Child Trust Fund
As the UK’s first universal savings product reaches its fifth birthday, these figures give a clear indication that over the last five years the actions of parents, families and friends have changed the savings habits in the UK, for the better.
Prior to April 2005 less than one in five parents were saving for their children’s future. However since the launch of the CTF this figure has rocketed to three in five.
David White, Chief Executive of The Children’s Mutual said: “Given recent economic problems it is essential that the UK reignites its savings culture. In five short years there has been a 200 per cent increase in the number of people saving for their children over the long term and the Child Trust Fund has been the catalyst. This is nothing short of phenomenal, given the uncertain financial backdrop many families have faced.”
Since April 2005 parents of five million children who now have a CTF have used them as a means to change their savings habits:
- Currently 1.4m parents, family and friends are contributing to their children’s accounts with in excess of £22m being added every month
- Nearly three quarters of parents choose to proactively open their child’s CTF, which is a significantly higher engagement rate than ISAs and pensions
- The average direct debit payment made by parents into CTFs held with The Children’s Mutual is £24 – if this amount were paid monthly throughout the life of the account, it could result in a lump sum of £9,750 upon maturity after 18 years.
This commitment from parents and Government towards saving for children’s futures may mean that an estimated £2.96 billion will be available to young adults each year as they turn 18 – a significant amount towards the increasing costs of adulthood such as buying a car, attending university and getting onto the property ladder.
April this year also marks the beginning of additional payments into CTFs for disabled children who are entitled to Disability Living Allowance. These additional yearly payments of £100 or £200 for severely disabled children could mean an extra £3,000 at age 18 or £6,000.
David White concludes: “The introduction of additional payments for disabled children is crucial as it reflects the additional costs that disabled young adults and their families may face. Along with Government we hope that the additional money will help to enable these children have a smooth journey into adulthood.” Figures extrapolated from TISA – Sept 2009 CTF commentary document http://www.tisa.uk.com/statistics.html?stat_type=ctf £22,000,000 invested each month x 60 (months in 5 years) = £1.3billion / 1825 days (number of days in five years = £723,000 per day x 7 days per week = £5.061m.
 Abacus Research Ltd – Market Sizing Study for The Children’s Mutual 2001compared with 2010 The Children’s Mutual customer data Monthly MI (KF in 2009 56.7% of direct customers set up a DD at outset of average £24.63)
 HMRC quarterly stats as at 16 March 2010 – http://www.hmrc.gov.uk/stats/child_trust_funds/ctf-mar2010.pdf
 TISA – September 2009 CTF commentary document http://www.tisa.uk.com/statistics.html?stat_type=ctf
 HMRC 2009 statistical report http://www.hmrc.gov.uk/ctf/stats.htm compared to 40 per cent of the adult population has a private pension (ONS data – Family Resources Survey, Department for Work and Pensions – published May 2009 http://www.statistics.gov.uk/downloads/theme_compendia/pensiontrends/Pension_Trends_ch07.pdf ) and 30 per cent have an ISA estimate based on TISA April 2009 http://www.tisa.uk.com/statistics.html?stat_type=isa_pep which show £14 million ISAs in the UK. Average population over 16 = 49.1m therefore estimate one third of population with ISA.
 Based on contributions of £24 per month from parents. This future projected value is based on money being invested every month plus the Government’s initial £250 voucher and another £250 at age 7 for 18 years in a Stakeholder Child Trust Fund 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.
 This projection is calculated on the following assumptions based on figures from TISA Sept 2009 and HMRC 2009 Statistical report:
1. 67% of CTFs receive £250 voucher at 0 and age 7
2. 33% of CTF receive extra £250 at 0 and 7.
3. 21.5% of CTFs receive an average direct debit of £22.59 from birth
4. 9.3% 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
 Budget Report 2009 p100 (5.50)
 Future projected values are based on investing £100 and £200 a year respectively for 18 years 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.