Child Trust Fund

The Child Trust Fund (CTF) was introduced in in January 2005.  39 building societies offer a CTF.

Building societies are the main providers of the cash CTF: they account for 13 of the 19 providers of this product.  The BSA publishes data for the whole of the cash CTF market and these show consistently that where parents are offered a choice between cash-based and equities-based CTFs around 70% opted for the safety and greater certainty of the cash product. 

The BSA supports any policies which promote savings, and building societies are ideally placed to offer CTFproducts as they are already experts and have a strong track record in offering children’s accounts.  However, the administration surrounding the CTF deters some building societies from offering the product.  The requirements for fortnightly reporting to the tax authorities and statementing based on the child’s birthday, rather than the calendar or fiscal year, entail systems development and day to day administrative costs which some societies found to be prohibitive, given the low-cost, low-margin nature of the CTF product. The BSA has made representations to the Government seeking a more proportionate approach. 


Cash Vs Equity CTFs

The BSA believes that parents should have the choice between cash and equity investments and building societies are helping provide that choice. Cash is not necessarily better than equity, nor vice versa.

Parents should be able to take a balanced approach to children’s savings – balancing equity risk and potentially higher returns, with the certainty of a cash-based savings.  If a parent does not choose a product after a year, they will automatically be given the equity-based product, which they may not understand and may not be appropriate for them.

In August 2005, a Which? article on CTFs stated “Although Stakeholder CTFs are a convenient way to invest in stocks and shares, their combination of high charges and low-risk funds mean they’re unlikely to match the return of the best cash CTFs”.

• Parents may also be worried about ethical investment, and where the money is invested in a CTF based on the stock market.  Cash provides an ethical investment for those parents.

All CTF providers are required to offer the equity-based ‘stakeholder’ CTF.  Cash CTFs account for 25% of all CTFs opened by parents.

If parents fail to open a CTF within 12 months, the Government will open a stakeholder CTF for them.  The BSA urges parents to use their choice while they can.  

If vouchers have been lost, parents can contact the CTF Helpline on 0845 3021470 for advice on what to do, and get a replacement voucher.

CTF Providers and Distributors

• To date, 39 building societies are offering the CTF.  These are as follows:

Providers:   Britannia, Cambridge, Chorley & District, Earl Shilton, Furness, Hanley Economic, Ipswich, Leeds, Monmouthshire, Mercantile, Nationwide, Shepshed, Skipton and Yorkshire.

Distributors:   Barnsley, Cambridge, Catholic, Chelsea, Cheshire, Coventry, Cumberland, Derbyshire, Dunfermline, Leek United, Loughborough, Mansfield, Melton Mowbray, Newbury, Newcastle, Norwich & Peterborough, Nottingham, Principality, Progressive, Saffron, Scarborough, Scottish, Stroud & Swindon, Tipton & Coseley, Universal, Vernon and West Bromwich.

• To date, there are 19 providers of the cash-based CTF, 13 of which are building societies - Britannia, Cambridge, Chorley & District, Earl Shilton, Furness, Hanley Economic, Ipswich, Leeds, Mercantile, Monmouthshire, Nationwide, Shepshed, Skipton and Yorkshire.  The remaining providers are Abbey National plc, Clockwise Credit Union, Dragon Savers Credit Union, Leeds City Credit Union, Loans and Savings Abertawe Credit Union and Methodist Chapel Aid Ltd.

• The relatively low numbers of building societies offering a cash-based CTF can probably be explained by:
  • The relatively burdensome administration associated with the CTF, including a requirement for fortnightly reporting to the HM Revenue & Customs and statementing based on the child's birthday.