Increase in Child Trust Fund top ups

The Child Trust Fund is a scheme introduced by the British Government in 2002, to help parents save for their children. Under the scheme parents are given £250 when their child is born, to invest on their behalf. They are then given an extra £250 when the child turns seven. Friends and family are allowed to add to this up to the sum of £1200 each year. The child gets the invested money plus the interest accumulated when (s)he turns eighteen.

There has been much talk of the lack of parents taking advantage of this scheme. It has been reported that over 50,000 families haven’t invested their CTF voucher, meaning that the government invests it on their behalf. This appears to show a lack of interest in the scheme, but this is not completely accurate.

Many parents who have decided to take up the scheme are using it to good affect on behalf of their children. A survey by TISA has looked at 1.77 million child trust fund’s, and according to their findings 23.3% of parents have a direct debit that they are using to pay a monthly amount towards the fund. The average parent is thought to be paying around £21 into the account each month. An account that has someone paying in this amount every month over an eighteen year period would accumulate over four and a half thousand pounds, and that doesn’t even include interest. A large number of parents who aren’t doing this are still contributing. Some are choosing to put in one lump sum each year, while others are putting in some money when they can afford to. The number of people putting in a lump sum once a year now stands at 6.3%.

One of the government’s points to support the scheme is that it encourages both parents and children to save. Figures show that the amount now saved by parents on behalf of their children is a lot higher than before. A lot more is being put into Child Trust Funds, than put towards children in other ways. The scheme may be encouraging parent to think about saving for their children, many of whom wouldn’t have thought about this otherwise. Many think that by seeing the amount that has been saved for them, eighteen year olds will see the advantages of saving, therefore encouraging them to do the same.

Andrew Marshall ©

Child Trust Fund