This week’s latest statistics report from government on Child Trust Funds (CTFs) indicates that a quarter of families fail to actively open an investment fund for their children within 12 months of receiving their voucher. This has been attributed to difficulty in choosing a fund from the wide range of options available in the marketplace.
Under the Child Trust Fund scheme, a £250 voucher is issued by government to every child born since 1st September 2002, which must be used to open a fund in the child’s name, from one of the many dedicated CTFs now available from 71 providers in the marketplace.
If a voucher is not invested within 12 months, it expires and the £250 is then invested by the Revenue Commission in a “Revenue Allocated Account” CTF on the child’s behalf.
The new statistics reveal that by 5 April 2009, 26% of the vouchers issued during 2007/8 had expired due to not being used. The proportion of vouchers expiring has been remarkably consistent in previous years, varying only from 25-27% in each of the 7 years of the scheme to date.
One possible reason for this hesitation may be the bewildering volume of information presented to parents from CTF providers, with the number of providers rising from 49 to 71 in the last financial year alone.
Funds performance also varies widely from product to product. In the period June 2005 to June 2008, for example, the Children’s Mutual Shariah Child Trust Fund returned 30.2%, compared to the NatWest Child Trust Fund at 12.34%.
Industry experts have suggested that both the range of available products and the wide variations in performance underline the need parents have for independent financial advice to assist them in choosing a fund.
