Child Trust Fund (CTF) opening rates have risen from 70 to 72 per cent, new figures disclosed by the Treasury revealed this week.
Introduced in September 2002, the Child Trust Fund
is a government initiative providing a £250 savings voucher to every child born after this date. The voucher is used to start a long-term savings or investments account which cannot be accessed until the child has reached the age of 18.
Each year an additional amount of up to £1,200 can be paid into the CTF account, which will be tax-free, and the government will provide parents with another £250 voucher when the child turns seven.
Despite these benefits, many parents did not take advantage of their Child Trust Fund vouchers and did not chose a CTF provider which prompted the government to renew efforts to increase awareness of the scheme.
Economic Secretary Kitty Ussher attributed the increase in new account openings to initiatives which highlighted the scheme to parents and children through the educational system.
She also emphasised the importance of raising awareness of CTFs among low-income families and of encouraging them to make contributions to the account, however small they might be, in order to make the most of it and provide their children with a head start in the future.
The fact that more parents are being proactive and opening an account suggests that they are also more likely to make additional contributions to the CTFs over the lifetime of the account.
Tony Vine-Lott, Director-General of the Tax Incentivised Savings Association (TISA) commented: "A key aspect of the CTF is the link between providing a significant asset to a young person turning 18 and getting children and families engaged with financial products."
"TISA is delighted that the Government has reaffirmed the need not just to get more CTFs opened, but to increase parental contributions once the fund is opened. To this end, providers have had a key role to play with Government to encourage parents to add to their child's scheme."
Three different types of Child Trust Fund accounts are available, including savings accounts, stakeholder accounts or shares accounts. A range of different providers offers different interest rates and conditions, so it is worth shopping around to find the best deal.