Almost half of Child Trust Funds going to waste

18 August 2008 / by Rebecca Sargent
Despite the success of the launch of Child Trust Funds, it seems that their potential returns are being wasted as new research from Nationwide shows that just 57 per cent of all CTF vouchers have been paid in so far this year.

Furthermore, a quarter of all Child Trust Fund vouchers have already expired, meaning that in total, around £248million in vouchers and potential interest has effectively been thrown away for a year by parents failing to use their child's CTF.

According to the research from Nationwide, in just 12 months, children are collectively losing out on more than £12.9million in interest alone as parents leave them in a drawer or pinned to a notice board.

Child Trust Funds were introduced by the Government with the intention of kick starting savings with the £250 voucher, available to all children born after September 1 2002 and in receipt of child benefits. They are aimed at promoting child savings and have the potential to accumulate interest, and small but regular deposits could eventually amount to thousands.

According to Nationwide, children whose parents invested their CTF voucher in a Nationwide Child Trust Fund and contributed as little as £20 a month, could be enjoying a tax free sum of more than £9,000 by the time they reach adulthood.

If the CTF is not invested in to a chosen CTF account within the twelve month window, the Government will automatically invest it in the child's name in a CTF account, but it may not be as fruitful as one chosen.

Nationwide's savings director, Matthew Carter, said: "The Child Trust Fund is a great, tax-efficient savings vehicle for children as when they grow up they will hopefully have developed a savings habit which will continue into adulthood.

"However, we are disappointed that so many vouchers have either expired or are not being used to open a Child Trust Fund. To get the most out of the Child Trust Fund, parents should invest their child's voucher early to help it achieve its full potential.

"Encouraging a culture of saving in children can make a real difference to their lives and by topping up their Child Trust Fund on a regular basis, parents can really help to give them a head start in life."

© Fair Investment Company Ltd