The Children's Mutual has reiterated its plea to parents to open Child Trust Fund accounts for their offspring if they are to help them improve their chances of social mobility when they grow up.
The plea follows a recent speech by David Cameron in which he threw the spotlight on social mobility as a key factor inhibiting the development of the UK. Lower income families save more as a proportion of their income than more affluent homes. This, says David White, chief executive of the Children's Mutual, is the reason that Child Trust Funds were introduced by the Labour government. Mr White stated that the Child Trust Fund was introduced to help create a level playing field by providing children with a financial dowry when they reached 18 on which to embark on achieving their ambitions and fulfilling their goals.
Andrew Hagger, of comparison website Moneynet, agrees but says that greater competition is required to improve interest rates such that parents are encouraged to save. He bemoans the low rates available on child savings accounts and cites this as a reason that parents do not bother.
Child Trust Funds were introduced in 2005 to provide every child born since September 1st 2002 with a £250 voucher that can be invested in an account that matures when the child reaches 18. Children from low income families receive a £500 voucher. In addition, all children under the programme receive a further £250 (£500) voucher on their seventh birthday. Under the Child Trust Fund rules, parents, family or friends can top up the account by up to £100 per month on a regular savings plan or £1,200 by ad hoc contributions.
Since the scheme was introduced, around 4.6 million Child Trust Fund accounts have been opened with approximately £2 billion pounds invested. The Children's Mutual also released research findings that showed 74% of parents have actively opened an account whilst 30% of low income families make regular monthly contributions into Child Trust Funds.
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