Lower minimum top-ups increase accessibility of CTFs

Following reports last week that Child Trust Funds, designed to give poor children a modest nest egg when they turn 18, are favouring the middle classes, Engage Mutual, a leading provider of CTFs, is urging other providers to drop the minimum top-up rate for CTFs.

The Engage Mutual CTF is one of the few Child Trust Funds to have a minimum direct debit top-up rate of £5 per month and, perhaps as a result Engage CTFs have a higher than average direct debit take up rate of 28.2% compared to the TISA average of 23.4%.

Contrary to suggestions that low-income families tend to avoid savings like CTFs which cannot be touched, data from Engage Mutual’s CTF customer base shows that lower income families are topping up their children’s CTFs by a higher proportion of their incomes than higher income parents. Lower income families invest 1.1 per cent of their post-tax monthly salary into their child’s CTF which is almost double the proportion saved by higher income families, who set aside just 0.6 per cent of their monthly salary.

While both income groups have increased the regular monthly amount they are saving for their children since the launch of the CTF initiative in April 2005, lower income families are again ahead of the game. This group has increased the amount saved by nine per cent since May 2005, with higher income families topping up eight per cent more each month.

Karl Elliott, Marketing Director at Engage Mutual, commented on the findings: “As a leader in the child savings market, and with just over 60% of our CTFs being taken out online, Engage is committed to making it easy for everyone to save little and often for their child's future. Enabling parents to pay as little as £5 per month by direct debit into their child’s CTF makes it more affordable to all families.

“Regardless of household income, everyone should be encouraged to save for their children's long term future. We would urge parents to seriously consider setting aside a small amount of money on a regular basis. They could be surprised to see how monthly instalments add up over the long-term.”