Parents' hopes for child trust fund

28.06.2005 Most parents would like their children to use their matured Child Trust Fund to help pay for their university education, according to new research by Halifax Financial Services.

Most parents would like their children to use their matured Child Trust Fund to help pay for their university education, according to new research by Halifax Financial Services.
At the age of 18, when the CTF account matures, most young adults currently have little access to a substantial sum of money but it is generally a time when they most need it. Research undertaken by NOP World with parents who have opened Halifax CTF accounts highlighted three main areas where they hoped their children would use the proceeds from their accounts:
University 61% Most parents hope that their child will use the money to fund their university education, which is bound to be much more expensive in 18 years time. 
Car 28% Over a quarter of parents hope that their child will be able to buy a car with the proceeds of their CTF.
House deposit 19% Almost one in five parents hope that the CTF will provide a sum large enough to be used as a deposit to help their child onto the housing ladder.
In addition, 60% of parents plan to make additional contributions to their child's CTF, with almost half of those (47%) planning monthly contributions.
Although only 8% of parents expect to invest the maximum annual contribution of £1,200 each year, 42% said they will contribute between £100 and £250, and 31% plan to increase their level of investment in subsequent years.
Other family members and friends can also contribute to a CTF, and 73% of parents said they expect their child's grandparents to make additional investments.
All children born after 31 August 2002 are eligible for the CTF, and the Government has already issued over 1.7 million vouchers but less than half a million accounts have been opened.
Halifax Financial Services estimates that collectively the children whose parents have not opened accounts for them could be missing out on £1.8 million a month (assuming a £250 voucher invested in a Stakeholder CTF and growth of 7% a year).
Ray Milne, Managing Director of Halifax Financial Services, said:
"The Government has sent free cash of at least £250 to over 1.7 million people and less than one in three people have opened an account.  Most parents probably still have opening a CTF on their 'to do' list, but we're urging them to act now and ensure their children benefit from their investment."
15-06-2005
Abbey’s market share
HM Revenue and Customs recently revealed that 499,000 Child Trust Fund accounts have been opened.  Abbey is claiming a 15 per cent share of the market, with more than 77,000 accounts open. Two thirds of these accounts are cash and one-third stakeholder.
HM Revenue and Customs also said 1.2 million vouchers have yet to be invested or deposited, and new research from Abbey shows some of the reasons for this:

Two thirds (62 per cent) of those who hadn’t used their voucher yet said they ‘simply haven’t got round to it yet’ Almost a quarter (23 per cent) haven’t taken the plunge because they don’t know which supplier to choose.   Most say they have chosen, or will choose, their supplier because of their trusted name (48 per cent), closely followed by research they’ve done on the internet (37 per cent) and research into the best interest rates (33 per cent).
Cash or investment?
The main reasons for choosing cash are ‘because it’s safer than investing in stocks and shares’ (47 per cent) and because ‘I can guarantee that I won’t lose money and will be able to tell how much I will get back’ (24 per cent).
Just over half (52 per cent) expect to earn five per cent annual interest on a cash account, with a fifth (20 per cent) saying they don’t care as long as the money can’t go down.  A further 14 per cent don’t know, and an optimistic one in ten think they will earn more than seven per cent per year on cash deposit.
Two thirds (65 per cent) of those preferring a stocks and shares option say this is because the fund could be worth a lot more, and nearly one in five (19 per cent) are used to investing in the stock market so understand a bit about how there could be potentially bigger returns than on a cash deposit.  However, nearly a third (29 per cent) don’t know how much annual growth to expect, nearly four in ten (37 per cent) expect an annual return of seven per cent, and about one in five (23 per cent) expect to earn five per cent.  One in ten (nine per cent) expect to earn 10 per cent a year or more.
Additional contributions
More than half (52 per cent) will definitely make additional contributions, a quarter will not, and the rest are undecided. They estimate their average additional annual contribution to be £325.   Eight out of ten say they would invest more in the fund if the Government matched every pound the parent contributed.
The most popular reasons by far for parents putting money in a CTF is to help their child get by at University or college (79 per cent), and to help with a deposit for their first property (72 per cent).  Entrepreneurship also comes high on the list, with almost half (48 per cent) saying they want it to help them if they want to start a business.  Nearly half (47 per cent) are worried their child might just blow the money when it becomes available to them at age18.
Less than a third of parents first heard about Child Trust Funds from the Government.  Just as many found out about them through advertising, newspaper articles or TV news.
Notes to editors
1.YouGov interviewed 414 adults with a child of CTF age, or planning to have a child (Fieldwork: 11th May 2005 – 18th May 2005). YouGov is a member of the British Polling Council (http://www.britishpollingcouncil.org).
2.YouGov interviewed a sample of 2,584 GB Adults (Fieldwork: 20th December 2004 - 4th January 2005). The survey was carried out online reaching 2,157 parents in all. The survey also interviewed 302 people who are planning to have a child over the next two years. YouGov is a member of the British Polling Council (http://www.britishpollingcouncil.org).
3.The Abbey Child Trust Fund Account is provided by Abbey National PEP and ISA Managers Limited, which is authorised and regulated by the Financial Services Authority.
July 2005