Parents could face struggle to find place for reduced child trust fund vouchers

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Written by Ray Clancy

Monday, 26 July 2010 08:30

Family Investments, the leading provider of Child Trust Funds, says it will continue to accept the new reduced vouchers due to be introduced next month.

The value of CTF vouchers will fall from £250 to £50 on 1st August for better off families and from £500 to £100 for lower income families and stop completely on 1st of January 2011. And the second £250 payment to children on their seventh birthday will also cease from this date.

There will also be no more CTF vouchers issued by the Government to children born after 1st January although parents who received vouchers before this deadline can still open an account in 2011.

Family Investments said it is committed to managing these and its existing 1.1 million CTFs until the children turn 18 although there is expected to be some consolidation of the CTF market, as banks and other providers assess the profitability of running their CTF books and whether they want to take on the reduced value £50 voucher business.

It is likely that some providers will drop out of the market as a result of the changes, and there is already evidence of providers severely cutting their CTF marketing spend. Parents could find it increasingly difficult to find a home for their CTF voucher as the number of places offering CTF reduces, leaving them to question where they can invest their voucher and maximise the benefits.

The company said that even with no age seven payments and a reduced voucher value of £50, it is able to remain in the market because the size of its CTF book means it is able to drive greater economies of scale than many other providers, and all the CTFs are administered in-house which ensures flexibility, cost control and efficiency.

‘The 1st August will bring a lot of change and parents will be rightly confused and concerned, the CTF is an 18 year investment and parents need reassurance that it will be in safe hands,’ said Kate Moore, head of savings and investments at Family Investments.

‘Family Investments is the leading provider of CTF's, we have been in the market since day one and will continue to look after our existing account holders as well as accepting new accounts with the £50 voucher. We have been a provider of the CTF since it launched in 2005 but have never borrowed any money against future CTF business which is why our business is sustainable and remains strongly placed for the future,’ she explained.

`‘Whilst we are preparing for the demise of the scheme, it is still deeply sad news for families that the CTF will be scrapped. We are calling on the government to retain the CTF wrapper, with or without the Government contribution because we still believe that CTF is the best and simplest option for parents to save for their children,’ she added.