Five Years, Five million savers
What a difference five years make – back in 2005 interest rates were on the rise and the UK savings ratio was headed for its lowest point in nearly half a century – fast forward to 2010 and the trends have reversed with one savings scheme in particular leading the march and engaging the UK population; the Child Trust Fund (CTF). Five years on from the first vouchers being issued, leading provider The Children’s Mutual has identified five reasons why the introduction of the CTF has revolutionised long-term savings for children.
Reason One – Five million accounts
Every eligible child born since 1 September 2002 has a CTF account – this means that 2010 will see more than five million children holding CTFs.
Reason Two – From one in five to three in five
Before the CTF was introduced just one in five families were saving over the long-term for their children – now around half of CTF customers with The Children’s Mutual set up a monthly direct debit on the day they open their child’s account. And even if you look at wider industry statistics, 31 per cent of CTFs receive some form of additional saving.
Reason Three – over 85 per cent engagement rate
Nearly three quarters of parents choose to proactively open their child’s CTF account. However, a survey by The Children’s Mutual also found that when asked over one in 10 parents with vouchers were opting to let the Government open the account for them – making an engagement rate of 85 per cent. Compared to engagement rates of other savings products – 40 per cent of the adult population has a private pension and 30 per cent have an ISA – the CTF has driven the UK adult population to engage.
Reason Four – over £2.5 billion a year
The Children’s Mutual estimates £2.74 billion will be available to young adults each year as they turn 18. Currently 1.4m parents, family and friends are contributing to their children’s accounts with in excess of £22m being added every month – money set to help towards the cost of higher education, first homes and beyond.
Reason Five – 50 per cent to lowest income families
The Children’s Mutual’s calculations suggest 50 per cent of the Government CTF investment so far is going to 1.5 million families on the lowest incomes (under £15,000), with families in the lowest income bracket saving a higher proportion of their household income for their children than those in more affluent groupings.
David White, Chief Executive of The Children’s Mutual, said: “To those of us involved with the CTF, five years has gone by in the blink of an eye. And yet in that short amount of time, the results have been startling – the CTF has done what no other savings account has achieved before – getting the mass UK population engaged and saving. We’re delighted that parents have engaged with the first universal savings scheme, realising that the only realistic way to fund their adult children’s futures is to start saving now.”http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090302.pdf
 HMRC Quarterly Stats Sept 2009 – 4.6million; estimated increase of 0.2million per quarter http://www.hmrc.gov.uk/ctf/stats.htm
 Abacus Research Ltd – Market Sizing Study for The Children’s Mutual 2001
 The Children’s Mutual customer data 2009 Monthly MI report
 TISA – September 2009 http://www.tisa.uk.com/statistics/23_20090915C.pdf
 HMRC 2009 statistical report http://www.hmrc.gov.uk/ctf/stats.htm
 The Children’s Mutual monthly brand tracker research, 1333 respondents.
 Family Resources Survey, Department for Work and Pensions – published May 2009 http://www.statistics.gov.uk/downloads/theme_compendia/pensiontrends/Pension_Trends_ch07.pdf
 TISA April 2009 http://www.tisa.uk.com/statistics.html?stat_type=isa_pep
 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. Projections do not include lifestyling. 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.
 TISA – September 2009 CTF commentary document http://www.tisa.uk.com/statistics.html?stat_type=ctf
 TCM Internal Source
 Family Resources Survey 2007