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Children lose out on trust fund

Cash giveaway - parents are losing their kids a potential £7m of Child Trust Fund money.

The Child Trust Fund (CTF) celebrated its second birthday this year, but government figures show that nearly a quarter of CTF vouchers issued are not being invested by parents within the 12-month timeframe. Collectively, this means that children are losing out on a potential £7.5 million worth of investment growth.

Nationwide Building Society is calling on the government to do more to encourage parents to invest their child’s voucher sooner so they won’t miss out on interest or investment growth.

As of December 2005, about 2.2 million vouchers were issued, yet only 1.66 million of these were invested. Of these, 25 per cent of vouchers had expired, leaving them to be automatically invested on the child’s behalf. These children missed out on 12 months of interest or investment growth, averaging £14 each.

However, over the years this figure rises to £35.30 as their investment will have been reduced to 17 rather than 18 years. Collectively, £19 million will have been lost by the time these children reach 18 years of age.

By December 2006, almost 2.95 million vouchers had been issued, but only some 2.1 million have so far been invested by parents, leaving around 850,000 children a year short in their CTF investment potential.

Nationwide published the findings of research on the attitudes of MPs to the trust fund scheme. It found that 92 per cent of Labour MPs felt the government should take measures to increase early take-up of CTF vouchers to ensure children do not miss out on interest on, or growth of, their voucher.

Matthew Carter, Nationwide’s divisional director for mortgages and savings, says, “The government needs to do more to encourage parents to invest their child’s voucher as soon as possible and certainly before the 12 month expiry period. Otherwise, through no fault of their own, it is the children who are losing out on interest or investment growth.

“The government has said its aim is to entrench a culture of saving for people of all ages. However, they still need to get a quarter of parents on side and in doing so could make a real difference to so many young people, giving them a nest egg to start their adult lives.”
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