Child benefit snub costs kids millions in lost savings
Saturday 27 May 2006
Up to 50,000 children in England and Wales may be missing out on their free Government child trust fund money, simply because their parents have not registered them for child benefit. Research from Halifax Bank suggests that up to 2 per cent of parents never claim child benefit, even though the money is available to all families with children under the age of 16, irrespective of their income.
Under the child trust fund scheme, new-born babies are entitled to a £250 voucher from the Government - rising to £500 for children in low-income families - which must be invested on their behalf. Parents are allowed to top up the accounts with up to £1,200 a year and children get a further contribution from the state on their seventh birthday. The funds can't be cashed in until children reach age 18.
However, while all children born since 1 September are eligible for the scheme, parents are only sent the savings vouchers once they have registered for child benefit. So families that don't register for the payment - worth £17.45 a week for the eldest child - will miss out.
Ray Milne, managing director of Halifax Financial Services, said that while some parents felt they did not need child benefit, families should not miss out on child trust funds.
"We understand that new parents have a lot on their minds but it is vital they take the time to think about their children's financial future," Milne said. Halifax research suggests 47,000 children have missed out on vouchers worth £16.5m because their parents have failed to apply for child benefit.
Critics of the child trust fund scheme have pointed out that many parents who do receive the savings vouchers subsequently fail to open an account.
The most recent figures from the Treasury suggest a third of the 2.3m parents sent savings vouchers so far have yet to cash them in. The Government automatically sets up default accounts for children on their first birthday if their parents have failed to do so, but this still means losing a year of returns.
Brian Morris, head of savings policy at the Building Societies Association, said: "These accounts are a great way for parents to kickstart a savings habit for their child and those parents who have not yet found a home for their voucher should do so - the earlier you open a cash CTF, the more interest will be paid."
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