Child Trust Fund vouchers go unused

Nationwide reveals that 25% of Child Trust Fund vouchers have already expired and only 57% of live vouchers have been paid in so far this year. This means that around £248 million in vouchers and potential interest has effectively been thrown away for a year by parents failing to use their child's CTF voucher upon receipt. In just 12 months, children are losing over £12.9 million collectively in interest alone as the vouchers are left languishing in drawers or on notice boards. Furthermore, if parents do not choose a provider the Government will decide for them and this may not be the most suitable account to meet their needs.

Nationwide would like to encourage all parents to use their Child Trust Fund voucher and to save even the smallest amount in their child's CTF. Nationwide would also like the Government to do more to promote the benefits of saving. Children, whose parents invested their Government voucher in a Nationwide cash CTF and who contribute just £20 a month, could be enjoying a tax free nest egg of over £9,000 by the time they reach adulthood. This will then be automatically converted into a cash ISA, meaning that the children can continue to have tax efficient savings even after they turn 18.

These calculations are based on Nationwide's cash CTF account. The Society also offers an Equity Stakeholder CTF account, provided by Legal & General. Customers should ensure that they choose the account that is most appropriate to their needs because if vouchers are not invested in the first 12 months, HM Revenue and Customs (HMRC) will open an Equity Stakeholder CTF account in the child's name with a default CTF provider of HMRC's choice.

Matthew Carter, Nationwide's savings director, said: "The Child Trust Fund is a great, tax-efficient savings vehicle for children as when they grow up they will hopefully have developed a savings habit which will continue into adulthood.

"However, we are disappointed that so many vouchers have either expired or are not being used to open a Child Trust Fund. To get the most out of the Child Trust Fund parents should invest their child's voucher early to help it achieve its full potential. Encouraging a culture of saving in children can make a real difference to their lives and by topping up their Child Trust Fund on a regular basis, parents can really help to give them a head start in life."

Nationwide offers both cash and equity Child Trust Funds. The cash CTF currently pays 6.50% gross p.a./AER inclusive of a conditional bonus. The Equity Stakeholder CTF is provided by L&G.

For more information, visit nationwide.co.uk