Children miss out as parents forget free savings vouchers

More than a million children are missing out on free Government cash because their parents have so far failed to use Child Trust Fund vouchers.

More than a million children are missing out on free Government cash because their parents have so far failed to use Child Trust Fund vouchers.

Child Trust Funds, a new scheme designed to encourage families to save, were formally launched in April. All children born since 31 August 2001 are entitled to vouchers worth at least £250, which must be invested with an official provider, typically a bank, building society, fund manager or friendly society.

However, the Inland Revenue this week announced that it would launch a new advertising campaign to highlight the scheme in July, because so few parents have invested their children's vouchers. Of the 1.74 million vouchers issued so far, parents have invested just 499,000 - less than one-third.

The figures suggest that more than a million families have still to claim their cash from the Government, despite widespread publicity about the trust fund scheme before its launch.

Mona Patel of the Investment Management Association said: "This delay is only denying children the best possible returns when they come to cash in their funds at the age of 18."

In cases where families fail to invest their vouchers within a year, the Government plans to open a default account on children's behalf. But by then, children will already have missed out on a year of interest on the money.

Figures from Family Investments, one of the biggest Child Trust Fund providers, show that children could miss out on £640 at age 18 if their parents delay investing the vouchers for a year. The analysis assumes that parents top up their children's funds by £20 a month - the scheme allows friends and family to make extra annual contributions of up to £1,200 a year - once they have opened an account.

John Reeve, Family's chief executive officer, said: "We would urge a strong call to action to shake up parents from their apathy as every day that passes reduces the growth potential of those first vouchers."

Ray Milne of Halifax Bank's financial services arm estimated that families were collectively missing out on £1.8m a month by failing to invest the vouchers. "Parents need to take immediate action," Milne said.