Child Trust Funds continue to dominate children’s savings accounts
02 March 2013
- Four out of five (83%) parents with children aged 10 years old or under have savings in place for their children
- Child Trust Funds are the most common type of accounts (72%) despite being unavailable to new customers for several years
- Whilst fewer than one in 10 (7%) hold a Junior ISA, highlighting how many parents are unable to access these accounts
- Lloyds TSB calls on the Government to urgently review the current policy for Child Trust Funds and allow parents to transfer these accounts to Junior ISAs providing equal choice in the market for all parents
The majority of parents with children currently 10 years old or under have some form of savings account for their child in place, according to the latest research from Lloyds TSB. Of these parents the majority have a Child Trust Fund (72%) or standard children’s savings account (58%). However, Junior ISAs remain limited to a small minority of parents (7%), as many children remain locked out of these accounts.
In 2005, the then Government introduced Child Trust Funds for children born after September 2002, with the aim of ensuring all children had some savings by the age of 18. In November 2011, the Junior ISA was introduced to replace the Child Trust Fund. Since its introduction, the Junior ISA has remained unavailable to those children that would have been eligible for a Child Trust Fund, a barrier Lloyds TSB is keen to see the Government remove.
This latest research indicates that take-up of savings accounts for children born since Child Trust Funds became available, i.e. those under 10 years old, has been strong, with four out of five parents (83%) with children in this age range holding some form of savings accounts for their child.
Almost three quarters of parents whose child has savings (72%) have a Child Trust Fund in place, whilst just under three fifths (58%) continue to use a standard children’s savings account. Unsurprisingly, take up of the Junior ISA lags both these accounts, with fewer than one in 10 (7%) saving in a Junior ISA. This is likely to be due to the fact they have been available for only little over a year, and any child between the age of two and 10 is still ineligible to hold such an account, as a result of Government policy.
Of those parents whose child has a savings account, around two fifths (44%) say that they pay in regularly to these accounts, while a further third (30%) pay in occasionally. On average, parents are saving £250 a year in their children’s savings accounts.
However, a quarter of the parents with a savings account in place for their child are no longer adding to their child’s savings; one in 10 (10%) have never paid money into their child’s savings account themselves, 8% paid into the account when they first opened it but haven’t since, and 7% used to pay in regularly but haven’t added anything to their accounts in over two years.
The main barrier parents cite for not saving for their children is the cost of living, which they feel is too high and leaves them with no spare cash to put away for their child’s future: three fifths (57%) of parents who have never saved anything for their children, and do not have an account set up, state this as their primary reason. At the same time, over a third (36%) of all the parents surveyed agree that the cost of everyday living is prohibiting them from regularly paying into their children’s savings account.
However, over half of parents (53%) feel that the Government is not doing enough to help parents to save for their children. This compares with a fifth (22%) who do not believe it is the Government’s responsibility.
Andy Bickers, director of savings at Lloyds TSB comments:
“This latest research clearly indicates that there is an appetite for parents to save and build up a nest egg for their children, but a high proportion of parents are being locked out of the latest accounts and offers coming on to the market as they cannot access Junior ISAs.
“The Junior ISA allows parents to set aside money throughout their child’s life in a tax efficient way, building that all important nest egg which could either help fund their university education or help them take that first step on the property ladder. In order for all parents to get the maximum choice of deals, the Government needs to urgently review its policy and allow access to the Junior ISA for those that were eligible for a Child Trust Fund.”