5th January 2009
With new levels of Child Benefit coming into effect from January 5, leading
Child Trust Fund (CTF) provider, The Children’s Mutual has welcomed the
move calculating that 2009 newborns could benefit from a collective lump
sum of at least £15.4 billion if families were able to save their Child
Benefit into their CTF account over 18 years.
From Monday 5 January 2009, parents and guardians will receive £20 a
week for first born or only children and £13.20 for each additional child
- up from £18.80 and £12.55 respectively in 2008 . According to The Children’s
Mutual calculations, an extra £1.20 and £0.65 for first and subsequent
children respectively can make a significant difference when invested
over the longer term. £20 a week invested monthly into a first child’s
CTF could result in £32,300 when the child turns 18 – an increase of more
than £1,800 over the projected maturity value of an account saving the
previous £18.80 a week.
And according to its calculations, if parents can manage to save even
a quarter of the Child Benefit they receive into a stakeholder CTF, it
could be worth £8,900 in 18 years’ time – a significant sum for a teenager
to start their adult life.
David White, Chief Executive of The Children Mutual said: “According
to our research, nearly a third (29 per cent) of parents currently say
they are saving their offspring’s Child Benefit while 22 per cent say
they use it to buy their children treats and that, despite the economic
climate, now is a good time to save for their children. For those who
can afford to do so, we urge them to save at least part of their Child
Benefit for the long-term future so they and their offspring don’t miss
out.
“The costs of attending further or higher education, leaving home or
simply learning to drive and buying a first car are significant for young
people and their parents. Using some Child Benefit to top up a child,
or children’s, CTF account is a perfect example of how a ‘little and often’
view of child savings can bring real benefits over the long term and help
families to ensure that all their children enter adulthood with a tangible
financial asset.”
Based on the lower rate of Child Benefit £13.20×52
weeks/12=£57.20 per month. £57.20 invested each month for 18 years in
a stakeholder CTF account, alongside the Government’s initial £250 voucher
and another £250 at age 7, with yearly growth at the FSA mid-rate of 7%
and charges of 1.5% of the account’s value each year. These figures are
not guaranteed, shares can go down as well as up and the eventual lump
sum could be more or less than indicated. 714,000 births x £21,700 potential
CTF maturity value = £15.4bn (£15,493,800,000). According to ONS for births
in England and Wales and NISRA for births in Northern Ireland there were
714,000 live births last year. www.hm-treasury.gov.uk/prebud_pbr08_press02.htm
Projection based on £86.66 (£20 per week * 52/12=£86.66) a month being
invested each month for 18 years in a stakeholder CTF account, alongside
the Government’s initial £250 voucher and another £250 at age 7, with
yearly growth at the FSA tax-exempt mid-rate of 7% and charges of 1.5%
of the account’s value each year. These figures are not guaranteed, shares
can go down as well as up and the eventual lump sum could be more or less
than indicated Footnote 4 – £30,492 = £1873 (£18.80*52/12=£81.47 a month
being invested each month for 18 years in a stakeholder CTF account, alongside
the Government’s initial £250 voucher and another £250 at age 7, with
yearly growth at the FSA tax-exempt mid-rate of 7% and charges of 1.5%
of the account’s value each year. These figures are not guaranteed, shares
can go down as well as up and the eventual lump sum could be more or less
than indicated) £20×52 weeks/12=£86.60 per month. A quarter of this =
£21.66). £21.66 invested each month for 18 years in a stakeholder CTF
account, alongside the Government’s initial £250 voucher and another £250
at age 7, with yearly growth at the FSA tax-exempt mid-rate of 7% and
charges of 1.5% of the account’s value each year. These figures are not
guaranteed, shares can go down as well as up and the eventual lump sum
could be more or less than indicated.
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