Evaluation of the Child Trust Fund

The IPPR have evaluated the Child Trust Fund, which has been operational in the UK since September 2005. The government scheme gives a voucher to all parents to invest in any bank offering the Child Trust Fund (CTF) account. The amount of the voucher ranges from £250 to £500, based on parental income. If the parent does not open an account within a year the government will open one on their behalf. A further deposit is made by the government on the child's 7th birthday (again variable according to parental income). Parents can also add a further £1200 to the account each year. Upon reaching 18 the young person can spend the money as they wish.

The scheme is intended to encourage saving, both by parents and the young people.

Using official data from the first two and a half years of operation along with academic research, industry data and original research, the report draws some initial conclusions:

Regarding initial parental involvement:
• Parental involvement is relatively high but could be improved.
• 75% of all accounts are opened by parents, which compares favourably with similar products.
• Parents who fail to open an account are more likely to be on a low income.

Regarding impact on savings behaviour:
• The initial government investment encourages further contributions.
• Positive effects on savings behaviour are becoming evident, even amongst low income households.

Regarding investing in shares
• 80% of all CFTs are shareholder accounts
• Private sector participation is extensive