Advisers should play on parents' CTF guilt to get them in for a review

With over 832,000 of the 2,486,000 Child Trust Fund vouchers sent out since the scheme started last year still uninvested, there is a golden opportunity for intermediaries to use CTFs as the peg to trigger a full scale review of clients’ finances, including post A-Day pensions.

Only 1,645,000 parents have invested their CTF vouchers. Whilst they might be prepared to let their own finances drift, when it comes to children, parents may feel more guilty at being so remiss. A mail shot to encourage parents to invest CTF funds could produce a wide response for IFAs who can identify clients with young children or expecting to start a family.

All children born after 1 September 2002 whose parents are claiming child benefit, are automatically sent a £250 voucher. Poorer families, largely those in receipt of tax credits or social security benefits, receive an extra £250 making a total of £500, and parents or friends and relatives can top it up by a maximum of £1,200 a year.

The government has pledged to add an additional sum of at least £250 when the child reaches the age of 7. The proceeds of the CTF roll up tax free but cannot be encashed until the child is 18 when the money is paid direct to the child.

David White, chief executive of The Children's Mutual, which has been one of the leaders in trying to motivate parents to make a positive decision about investing CTF vouchers, said the latest figures were, ‘great news for the nation's children.’

‘This clearly shows the beginning of a significant shift in the way this nation is thinking about saving for the future. This is brilliant news for future generations. Particularly encouraging is the fact that we've seen double the number of parents saving regularly over the long-term for their children, and many parents - and the wider family - are also contributing lump sums by cheque,’ White said.

The Children’s Mutual’s figures show that average monthly payment has increased by from £15 pre-CTF to £23, which means that, allowing for an initial government voucher of £250, and a further £250 top up at age seven, a child could receive a lump sum of around £9,483 when they reach 18. This could contribute around 23% of their university costs estimated at £42,000 or nearly 37% of the deposit for a first home.

’Even more important is that four out of five families have a stakeholder, or a share-based CTF account, for their children. We urge any family making a choice for their child to seriously consider the implications of their CTF account choice,’ White said.

Almost a quarter of all parents are yet to invest their Child Trust Fund voucher, with more than one in three (38%) admitting they haven’t done so because they are unsure where to invest it.

Figures from the Building Societies Association show that where a building society offers a cash savings account and an equity based CTF product, just over 73% of parents opt for the cash account.

Parents who do nothing will have their voucher invested in to a default fund on their child’s behalf. Any parents who have lost or misplaced the original voucher can ring HM Revenue & Customs on 0845 302 1470 for a replacement.