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Saving and Investing for Children - UK - April 2016

“Although 61% of parents in the UK are putting money away for their children’s futures, a third of these are not doing so on a regular basis. Moreover, there are a significant minority who are not managing to save anything at all. For many parents, having other more pressing demands on their money – such as paying bills and repaying debt – will take priority over saving for their children. However, there will be some parents who could manage to save – even a very small amount each month – given a prompt or the right incentive.”
– Sarah Hitchcock, Senior Analyst – Financial Services

This report discusses the following key topics:

  • Capturing parents early is key to success
  • Reach non-product holders and busy parents through ‘save the change’ initiatives
  • More needs to be done to jolt parents out of their apathy towards saving and investment returns

The UK market for children’s savings and investment products has undergone some important structural changes over the past decade, including the introduction and then subsequent cessation of the Child Trust Fund (CTF). The latter was replaced by the Junior ISA in 2011. Further changes to the ISA rules in 2015 have created additional opportunities, with transfers between CTFs and Junior ISAs now permitted.

Tracking the market during this period, Mintel’s consumer research shows that these developments have encouraged more parents to put money away for their children’s future. Today, around three in five parents in the UK are saving for their children, and a large proportion of these are doing so on a regular basis. In addition, more than a quarter of parents say that at least one other family member or friend is contributing to their children’s savings. Most often, the benefactor is a grandparent.

However, now that the State no longer contributes to children’s savings (CTF vouchers expired at the end of 2012), there is a question mark over whether the market can continue to attract the inflow of money that it has done over recent years. There is uncertainty too over whether the industry can sustain interest and commitment from parents, grandparents and others saving for children, particularly in a climate of low cash savings rates and increased stockmarket volatility.

Drawing on a range of industry data and independent consumer survey findings, Mintel’s Report considers these issues. It reveals what products parents are currently using to save for their children and what sources of money they draw on to do so. It also assesses their tendency to switch accounts and providers, and identifies the most common factors influencing their choice of product.

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Table of contents

  1. Overview

      • Products covered in this Report
      • Executive Summary

          • The market
            • Around 10 million parents are saving for their children
              • Figure 1: Estimated number of parents who are saving on behalf of their children, February 2016
            • CTFs are still the most widely-held children’s savings product
              • Strong growth in Junior ISA subscriptions and balances
                • Figure 2: Number of Junior ISAs subscribed, by component, 2011/12-2014/15
              • Lone parents account for around a quarter of the family market
                • Parent’s own financial situation will affect their ability to save
                  • Not much of a choice: Low returns on cash or a volatile stock market
                    • Companies and brands
                      • The children’s savings market is dominated by banks and building societies…
                        • …while children’s investment products are mostly provided by investment companies and friendly societies
                          • Banks and building societies still tend to favour in-branch applications
                            • The consumer
                              • Parents and grandparents are the main savers for children
                                • Figure 3: Proportion of parents with others saving for their children, February 2016
                              • A large minority of parents are not saving on behalf of their children
                                • Despite prevailing low savings rates, parents tend to favour cash over equity investment
                                  • Figure 4: Products used by parents to save for their children (ranked in order of popularity), February 2016
                                • In choosing where to save, around one in four parents was swayed by a recommendation
                                  • Figure 5: Factors influencing choice of product (ranked in order of significance), February 2016
                                • Many parents draw on multiple sources to save for their children
                                  • Figure 6: Sources of money put towards children’s savings (ranked in order of significance), February 2016
                                • 55% of parents are keen for their children to get into a good saving habit
                                  • Figure 7: Agreement with statements about general attitudes and behaviours related to saving for children (ranked in order of significance), February 2016
                                • Expected activity by parent-savers over the coming year
                                  • Figure 8: Agreement with statements about saving intentions and switching experience (ranked in order of significance), February 2016
                                • What we think
                                • Issues and Insights

                                  • Capturing parents early is key to success
                                    • The facts
                                      • The implications
                                        • Reach non-product holders and busy parents through ‘save the change’ initiatives
                                          • The facts
                                            • The implications
                                              • More needs to be done to jolt parents out of their apathy towards saving and investment returns
                                                • The facts
                                                  • The implications
                                                  • The Market – What You Need to Know

                                                    • Around 10 million parents are saving for their children
                                                      • Cash-based accounts are the preferred home for children’s savings
                                                        • Junior ISAs grow in popularity, while NS&I Children’s Bonds fall out of favour
                                                          • There are nearly 8 million households with dependent children in the UK
                                                            • Growth in child population forecast
                                                              • Not much of a choice: Low returns on cash or a volatile stock market
                                                              • Market Size

                                                                • Size of the adult population saving for children
                                                                  • Figure 9: Proportion of parents who are saving for their children, February 2016
                                                                • Products used by parents to save for children
                                                                    • Figure 10: Proportion of parents who own various saving and investment products for the purposes of saving for children, February 2016
                                                                  • A note about Mintel’s estimates
                                                                  • Market Segmentation

                                                                    • Children’s cash savings market estimated to be worth upwards of £8 billion
                                                                      • The past decade has seen a fall in the number subscribing to NS&I’s Children Bonds
                                                                        • Steady flow of CTF money into Junior ISAs
                                                                          • Strong growth in Junior ISA subscriptions
                                                                            • Figure 11: Number of Junior ISAs, amounts subscribed and average subscription, 2011/12-2014/15
                                                                        • The Family Environment

                                                                          • There are nearly 8 million households with dependent children in the UK
                                                                            • Changing social trends have altered the family landscape
                                                                              • Figure 12: UK households and family types, 1996, 2001, 2005 and 2015
                                                                            • Trend towards having fewer children is being maintained
                                                                              • Figure 13: Percentage of families with dependent children: by number of dependent children in the family, 2005 and 2015
                                                                          • Market Drivers

                                                                            • Child population set to grow over the next five years
                                                                              • Figure 14: Projected size of UK child population, 2015, 2020, 2025 and 2030
                                                                            • Only 17% of households with children would describe their financial situation as “healthy”
                                                                                • Figure 15: Current financial situation – Parents versus non-parents, February 2016
                                                                              • Parents are less confident about their financial prospects
                                                                                • Figure 16: Confidence in financial situation over the coming year – Parents versus non-parents, February 2016
                                                                              • Motivational drivers behind saving for children
                                                                                  • Figure 17: Reasons for saving for children, October 2011, December 2012 and February 2015
                                                                              • The Saving and Investment Environment

                                                                                • Key factors
                                                                                  • Low returns on cash provide a disincentive to save…
                                                                                    • Figure 18: Average monthly quoted cash deposit and ISA interest rates, January 2008-January 2016
                                                                                  • …while stockmarket volatility may also be deterring potential investors
                                                                                  • Companies and Brands – What You Need to Know

                                                                                    • The top five banking groups and the largest building society control 60-70% of the children’s savings market
                                                                                      • The investment sector is less concentrated
                                                                                        • Scope to develop online channel in the children’s savings market
                                                                                          • Halifax invests in TV advertising to reinforce its brand in the children’s savings market
                                                                                          • Competitive Strategies

                                                                                            • Market composition
                                                                                              • Various provider types
                                                                                                • Children’s cash savings – A stable market with low switching levels
                                                                                                  • Children’s investments – A fairly fragmented market
                                                                                                    • Customer acquisition strategies
                                                                                                      • Limited use of bonus and loyalty rates
                                                                                                        • Many children’s accounts can still only be opened via traditional channels, such as the branch
                                                                                                          • Technology-driven innovation
                                                                                                            • New app teaches children how to save money
                                                                                                            • Advertising and Marketing Activity

                                                                                                              • Limited above-the-line adspend
                                                                                                                • Figure 19: Total above-the line, online display and direct mail advertising expenditure on savings products and selected investment products, 2011-15
                                                                                                              • Halifax was the dominant advertiser in 2015
                                                                                                                • Figure 20: Total above-the line, online display and direct mail advertising expenditure on identified children’s savings products, 2011-2015
                                                                                                              • Providers make use of online and digital media to reach target audience
                                                                                                                • Nielsen Media Research coverage
                                                                                                                • The Consumer – What You Need to Know

                                                                                                                  • Market penetration
                                                                                                                    • Parents tend to favour cash over equity investment
                                                                                                                      • A personal recommendation can be very persuasive
                                                                                                                        • Many parents draw on more than one source to save for their children
                                                                                                                          • Many parents want to their children to get into a good saving habit
                                                                                                                            • Expected activity by parent-savers over the coming year
                                                                                                                            • Who Saves for Children

                                                                                                                              • 40% of parents are saving regularly for their children…
                                                                                                                                • …but around the same proportion are not saving at all
                                                                                                                                  • Figure 21: Proportion of adults with children and whether or not they are saving on their behalf, February 2016
                                                                                                                                • The propensity to save on a regular basis decreases as children age and the cost of parenthood rises
                                                                                                                                  • Grandparents are significant contributors to the children’s savings market
                                                                                                                                    • Figure 22: Others saving for own children, February 2016
                                                                                                                                  • 16% of non-saving parents say others are saving for their children
                                                                                                                                    • Figure 23: Others saving for own children, by whether or not parents are saving and how frequently February 2016
                                                                                                                                • Products Used to Save for Children

                                                                                                                                  • Low take-up of Junior investment ISAs
                                                                                                                                    • Figure 24: Products used by parents to save for their children (ranked in order of popularity), February 2016
                                                                                                                                  • Regular savings accounts are a popular choice with parents
                                                                                                                                    • Parents who save regularly are more likely to have a Child Trust Fund
                                                                                                                                      • Figure 25: Products used by parents to save for their children, by frequency of saving, February 2016
                                                                                                                                  • Factors Influencing Choice of Product

                                                                                                                                    • Around a quarter of parents made their product selection based on a recommendation
                                                                                                                                      • Figure 26: Factors influencing choice of product (ranked in order of significance), by type of product, February 2016
                                                                                                                                    • Just 15% of parents who are investing for children say their choice of product was determined by an adviser’s recommendation
                                                                                                                                      • Social media is not currently an influential channel in the children’s savings market, but it has the potential to be
                                                                                                                                        • Just over a third of parents who chose an investment product were existing customers of the provider
                                                                                                                                          • Having access to a local branch can also influence choice
                                                                                                                                          • Sources of Money Saved or Invested for Children

                                                                                                                                            • Many parents draw on more than one source to save for their children
                                                                                                                                              • Figure 27: Sources of money put towards children’s savings (ranked in order of significance), February 2016
                                                                                                                                            • Parents with older children are more likely to use their earnings
                                                                                                                                              • 15% of parents are saving some or all of their child benefit
                                                                                                                                                • Figure 28: Sources of money put towards children’s savings (ranked in order of significance), by frequency of saving, February 2016
                                                                                                                                            • Parent Attitudes and Behaviours Regarding Saving for Children

                                                                                                                                              • 55% of parent-savers want to encourage their children to get into a good saving habit
                                                                                                                                                • Just 35% of parent-savers say that saving for their children is a financial priority
                                                                                                                                                  • Figure 29: Agreement with statements about general attitudes and behaviours related to saving for children (ranked in order of significance), February 2016
                                                                                                                                                • 24% like to have easy access to their child’s savings
                                                                                                                                                  • Most parents fail to monitor the return they receive on their child’s savings
                                                                                                                                                    • Only 6% of parent-savers want to know about children’s saving and investment products
                                                                                                                                                    • Parent Saving Intentions and Switching Experience

                                                                                                                                                      • A fifth of parents saving for children plan to increase the amount they are putting away
                                                                                                                                                        • Figure 30: Agreement with statements about saving intentions and switching experience (ranked in order of significance), February 2016
                                                                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                      • More about CTFs and Junior ISAs
                                                                                                                                                        • Tax on savings
                                                                                                                                                          • Changes to the way savings are taxed from 6 April 2016
                                                                                                                                                            • £100 cap on parent contributions still applies
                                                                                                                                                              • Abbreviations
                                                                                                                                                                • Consumer research methodology

                                                                                                                                                                Companies Covered

                                                                                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                                                                                Saving and Investing for Children - UK - April 2016

                                                                                                                                                                £1,995.00 (Excl.Tax)