Family Investments: HMRC CTF statistics

Kate Baker, Head of Savings and Investments, Family Investments, commented: "At first glance the latest figures from HM Revenue & Customs suggest the Child Trust Fund (CTF) has met with a great deal of success but the low take up amongst poorer families is still a big concern.

"The Government's own research shows that 97% of eligible parents are aware of the CTF and today's take-up statistics show that 74% of parents continue to open accounts for their children. However, the figures demonstrate that a significant proportion of parents - more than a quarter - are still allowing vouchers to lapse and have their children's funds allocated by the Revenue. Indeed it appears that those at the greatest risk of this happening are poorer families, whom CTFs are designed to help the most. Lower socio-economic households are less likely to set up a CTF for their child and, more pertinently, once an account has fallen into the revenue allocation system, it is less likely to receive additional contributions which are vital in the creation of an asset that might facilitate social mobility.

"Both Government and providers have been striving to generate greater levels of take up, particularly with the introduction of "reminder mailings" this year, However, we believe that take up should be at a much higher level and that this can only be achieved through a simplification of the entire scheme.

"The fundamental problem is that the scheme is too complex to educate the less financially engaged, or to motivate the apathetic. Family Investments has come up with an ambitious plan of action to help overcome these problems and unlock more of the scheme's enormous potential. There is much that can be done:

Simplify the scheme so that there is only one clear option, the stakeholder account. Cash accounts have no real benefit and are almost certain to underperform stakeholder products in the long-term

Incentivise early uptake of the CTF, via a gift or bonus

Consider shortening the deadline for opening the account to three months

"The Government has already taken the step to remove complexity by introducing alternative ways to open the accounts, by telephone or online. Family Investments lobbied for these measures and welcomes their introduction in April 2009. We believe that this will make a significant difference to the amount of accounts open to parents."