More than a million families have failed to cash in free government savings vouchers worth up to £500 to their children, the Treasury admitted yesterday. Just 46 per cent of the 1.92 million vouchers sent out under the Child Trust Fund (CTF) scheme, formally launched in April, have been used, the latest government figures reveal.
Under the scheme, all children born since 1 September 2002 receive a voucher worth at least £250 from the Government, which must be used to open an account with an authorised CTF provider. Parents have a year to cash in the vouchers, which rise in value to £500 for children in low-income families.
Yesterday, however, the Treasury released figures showing that only 889,000 vouchers have so far been cashed, despite a publicity campaign in the spring designed to boost take-up.
Children whose families fail to use the vouchers will not miss out, because once the deadline expires, the Government automatically opens a default account in their name. But the figures will embarrass ministers, because the scheme was designed to encourage parents to save more on behalf of their children.
Banks, building societies and other CTF providers blamed poor communication and excessive regulation for the slow take-up by parents. John Reeve, the chief executive of Family Investments, said: "We have urged the Government to write again directly to all eligible parents yet to set up their children's accounts."
In research conducted this summer by Family, more than 75 per cent of parents said they did not fully understand how to invest their vouchers. More than half said the Government's advertising campaign had not improved their awareness.
David White, the chief executive of The Children's Mutual, said: "We should welcome the fact that thousands of parents have begun saving more through this scheme but it is clear more needs to be done."
The Treasury figures follow a warning last week from the Building Societies Association (BSA) that only 35,000 CTF accounts were opened with its members during July, the slowest month so far for the scheme.
The BSA also warned that most parents were choosing to invest in cash savings accounts rather than the government-backed stakeholder products, which offer exposure to the stock market. Most independent financial advisers recommend stakeholder CTFs because the accounts are long-term investments - children may not cash in their funds until they reach age 18.
Sir Malcolm Rifkind, the Conservative spokesman on work and pensions, said: "The Child Trust Fund appears to have been used more as a pre-election sweetener to parents, rather than a carefully thought through savings plan."
But the Tories continued to back the scheme, in contrast to the Liberal Democrats, who have said they would scrap CTFs.
Ivan Lewis, the Economic Secretary to the Treasury, said the Government was pleased with the progress of the CTF scheme.Reuse content