Although most parents are aware of the CTF scheme, and say they are responsible for deciding what to do with the money, they seem reluctant to do so. What can the Government do about it?
It is rare for a chancellor to offer financial rewards, let alone ones with few strings attached, but the Child Trust Fund (CTF), introduced earlier this year, is just that. Children born on or after September 1, 2002 are eligible to receive vouchers worth either &£250 or &£500 – and parents don’t have to do much to get the money, as the vouchers are automatically sent to them once they start claiming child benefit. The only proviso is that parents invest the money in an approved savings or investment account and that the cash cannot be touched until the child is 18.
Yet despite the obvious benefits, more than half of the 2 million vouchers sent to parents are sitting around gathering dust. This week, the Government embarks on a huge direct mail campaign as a call to action (MW September 29). But what has gone wrong? Was the scheme simply a non-starter from the outset, or was the promotional campaign ineffective?
In January, BDRC conducted a survey (the CTF Awareness and Registration Monitor) to establish the degree of parental awareness and understanding of CTFs, gauge account-opening behaviour and assess engagement with CTFs and their impact on existing savings behaviour.
From January to June, BDRC conducted 1,400 computer-assisted telephone interviews with parents of children eligible for a CTF. The survey looked at awareness of CTFs, the impact of the ad campaign, the selection of an approved CTF provider and the impact of the Government’s plan to introduce auto-allocation, whereby the Government invests the vouchers on parents’ behalf.
With an estimated 55,000 children born in the UK each month, there is much at stake. Parents must choose a provider approved by HM Revenue and Customs – these include banks, building societies, fund managers and retailers – to administer their child’s CTF. Furthermore, parents must choose either a stakeholder account (investment in company stock subject to government restrictions) or a non-stakeholder product, including savings accounts.
Despite being announced in April 2003, fewer than a third of parents were aware of CTFs in that year. It wasn’t until HM Revenue and Customs mailed all parents of eligible children and rolled out its campaign this January that awareness rose. M&C Saatchi developed a &£5m television campaign to support the mailing, while many product providers undertook their own promotions.
On the surface, it would appear the campaign was successful: according to the BDRC findings, the fundamentals of information pack and voucher distribution took place smoothly, and parents became increasingly aware of the purpose and mechanism of CTFs as the campaign unfolded. By June, 97 per cent of parents who took part in the research were aware of the CTF scheme, with more than 80 per cent finding the CTF information pack easy to understand.
But knowledge of the scheme and actually doing something about it remain poles apart. The lack of awareness and comprehension of CTFs have led to slow take-up. The ad campaigns have not been sufficiently motivating to prompt the majority of parents to open a CTF account. Furthermore, even though the Government has spent millions of pounds promoting the scheme, recall of any advertising or publicity concerning CTFs declined significantly after launch.
Added to the Government’s woes has been a general apathy towards CTFs. When BDRC asked parents why they had not yet used their child’s voucher, a huge 83 per cent were either still deciding on a provider or had no particular reason for not having done so. Many were unable to say when they were likely to open an account.
The Government was always aware of the likelihood of apathy, stating from the outset that it would impose auto-allocation of a CTF provider if the vouchers remained unused after 12 months. Parents feel strongly that it is their responsibility, not the Government’s, to decide what is best for their children’s future. This conflicts with the research findings that the overwhelming majority of parents who have invested their vouchers have opened cash-based CTF accounts, despite the fact that equities are likely to outperform cash in the long-term.
A new direct marketing campaign launches this week, and if it is to be successful it must be a strong call to action. The Government needs to get the message right if it is to motivate parents to act. It must also consider the auto-allocation issue and its implications carefully – otherwise, it could find itself the subject of some very negative press.
Trends is edited by Nathalie Kilby. Mark Long, client services director at BDRC, contributed to this week’s Trends Insight