Up to 1.2m families fail to invest child fund vouchers

More than a million families have failed to invest child trust vouchers worth £300m since the savings scheme was launched on 6 April, research indicates.

More than a million families have failed to invest child trust vouchers worth £300m since the savings scheme was launched on 6 April, research indicates.

A study by Sainsbury's Bank suggested that up to 1.2 million families - three-quarters of those eligible - have not used their vouchers to open a child trust fund with an authorised provider.

Donald Jarvie, the bank's child trust fund manager, said: "While parents should carefully consider which account is best for them and their child, they need to make sure they are maximising the potential returns for their children."

The bank says that parents who delay investing vouchers for six months could cost their children more than £300 in lost investment returns when the funds matured at age 18.

The warning reflects concern that many families have not got to grips with child trust funds, a government initiative to encourage parents to save more on behalf of their children.

Parents of children born since September 2002 began receiving their vouchers in January, but the scheme was not formally launched until the first day of the 2005-06 tax year earlier this month.

David White, the chief executive of the friendly society The Children's Mutual, said: "Now we have passed the 6 April start date, these vouchers are worth real money, so parents who haven't done anything with them are missing out on potential investment growth."

Mr White said that some parents were confused by the choice of products on offer, because different providers are offering exposure to different types of asset.

"Since children can't cash in the funds until age 18, this is a long-term investment, which gives the stock market a good chance of outperforming other asset classes," he said. "But many parents do not have the stomach for the volatility associated with shares."

Children whose parents do not open a child trust fund before their first birthday will have their vouchers automatically invested by the Government in a stakeholder account. These funds start out offering exposure to shares but then move into cash savings as children approach age 18.