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Saving and Investing for Children - UK - December 2010

This report looks in detail at the children’s savings and investment market, focusing primarily on how parents save on behalf of their children. The report looks at the key drivers of the market – many of which have been touched on above – and the challenges that providers face. The size of the market is examined, including a breakdown of the individual product types within both the CTF and non-CTF sectors. The key providers in the market are explored, in terms of both their market share and an overview of their business. The report concludes with a consumer research-based analysis of the market which explores how, why and how many parents save on behalf of their children.

  • The launch of Junior ISAs in Autumn 2011 is likely to prompt an increase in activity in the market and presents a significant opportunity for product development.
  • However, the closure of the CTF scheme at the end of 2010 will leave a big hole in the market, and with government contributions not applying to Junior ISAs, providers will have to work a lot harder to get parents to save for their children.
  • Children's pensions could emerge as a major beneficiary of the scrapping of CTFs, especially if the government changes the current rules to allow early access for things like university fees and buying a first house.
  • Providers should manufacture goal-specific children's savings accounts with relevant benefits in order to motivate parents to save for their children - for example, a university fees savings account that comes with a Young Person's Railcard.
  • Some 15% of parents only save for their children on an ad hoc basis. Rewarding regular saving could boost the market.
  • Financing university is by far the top reason for saving for children, and providers should stress the advantages of starting university savings early.

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Table of contents

  1. Issues in the Market

      • Key issues
        • Abbreviations
        • Market in Brief

          • More than five million CTF accounts
            • Figure 1: Ownership of children's savings/investment products, September 2010
          • The scrapping of CTFs will have a significant impact…
            • …as has the slowdown in child population growth
              • A relatively diverse sector with a variety of providers
                • Total sector adspend declined during the recession
                  • Figure 2: Topline advertising expenditure on savings and investment products for children, 2007/08-2009/10*
                • Online access is likely to become increasingly popular
                  • Over three fifths of parents save on behalf of their children
                    • Figure 3: Amount saved on behalf of children, September 2010
                  • Cash-based CTFs are the most commonly held product
                    • Paying for university is the most popular reason for saving
                      • Figure 4: Reasons for saving on behalf of children, September 2010
                  • Future Opportunities

                      • Children’s pensions as a replacement for the CTF?
                        • Offering goal-oriented products with additional benefits
                        • Internal Market Environment

                          • Key points
                            • Birth rates have fallen over the last 40 years
                              • Figure 5: Total fertility rate in the UK, 1960-2009
                            • The scrapping of CTFs will have a major impact
                              • Children’s pensions could emerge as an alternative to the CTF
                                • The launch of Junior ISAs in 2011 may kick-start the market
                                  • Changes in child benefit could impact the market
                                  • Broader Market Environment

                                    • Key points
                                      • Low interest rates have discouraged savers…
                                        • Figure 6: Average monthly quoted deposit interest rates at banks and building societies and the BoE base rate, end of month, January 2000-September 2010
                                      • …but the smart money is in equities at the moment
                                        • Figure 7: Monthly average value of the FTSE-100 index, January 2000-September 2010
                                      • The recession has impacted people’s ability to save
                                        • Figure 8: GDP, PDI, consumer expenditure and savings, at current prices, 2005-15
                                      • 11 million under-15s living in the UK
                                        • Figure 9: Trends in the age structure of the UK population, 2005-15
                                      • …but the challenges facing young people today are greater than ever
                                        • Fewer couples having children, but more challenges faced by offspring
                                          • Figure 10: Number of GB households, by family type, 1971-2007
                                        • The cost of raising children has increased considerably…
                                          • Figure 11: Distribution of dependent children, by family type, Great Britain, 1972-2007
                                        • …suggesting that starting early could be a good idea
                                          • Figure 12: Distribution of savings, by family status and value, 2008/09
                                      • Competitive Context

                                        • Key points
                                          • Many parents save for their children in an ordinary savings account
                                            • Pocket money and presents instead of a regular savings plan
                                              • Paying off debt is a priority for many at present
                                                • Figure 13: Gross and net total consumer credit lending, seasonally adjusted, Q1 2007-Q2 2010*
                                            • SWOT Analysis

                                                • Figure 14: Saving and investing for children – SWOT analysis, 2010
                                            • Who’s Innovating?

                                              • Key points
                                                • Enhanced interest rates and freebies are common…
                                                  • …but accounts could be geared more towards education
                                                    • F&C Investments takes an innovative approach
                                                      • The introduction of Junior ISAs could spark further innovation
                                                        • Skipton BS takes a goal-based approach to saving
                                                        • Market Size

                                                          • Key points
                                                            • The number of CTF vouchers issued continues to grow
                                                              • Figure 15: Number of CTF vouchers issued and accounts opened by parents, Q1 2005-Q2 2010
                                                            • The majority of accounts in existence are stakeholder schemes
                                                              • Figure 16: CTF breakdown, by type of account and asset value, April 2009
                                                            • HMRC-opened accounts have lower additional contributions
                                                              • Figure 17: CTF breakdown, by type of account and number/value of additional contributions, April 2009
                                                            • Well over half of parents have a non-CTF savings product
                                                              • Figure 18: Ownership of children's savings/investment products, September 2010
                                                          • Market Share

                                                            • Key points
                                                              • HMRC-opened accounts help to even out CTF market share…
                                                                • Figure 19: Number of organisations authorised to offer CTF accounts, 2008 and 2009
                                                              • …though two providers still dominate the market
                                                                • Leading players outside of the CTF market
                                                                • Companies and Products

                                                                  • The Children’s Mutual
                                                                      • Figure 20: Tunbridge Wells Equitable Group – annual results, 2008 and 2009
                                                                      • Figure 21: Tunbridge Wells Equitable Group – CTF statistics, 2008 and 2009
                                                                    • Family Investments
                                                                        • Figure 22: Family Investments – annual results, 2008 and 2009
                                                                      • Lloyds Banking Group
                                                                          • Figure 23: Lloyds Banking Group – annual results, 2008 and 2009
                                                                        • Nationwide
                                                                            • Figure 24: Nationwide Group – annual results, 2009 and 2010
                                                                          • NS&I (National Savings & Investments)
                                                                            • Santander
                                                                                • Figure 25: Santander UK – annual results, 2008 and 2009
                                                                            • Brand Communication and Promotion

                                                                              • Key points
                                                                                • Total sector adspend has almost halved since 2007/08
                                                                                  • Figure 26: Topline advertising expenditure on savings and investment products for children, 2007/08-2009/10*
                                                                                • A diverse range of providers operate in the market
                                                                                  • Figure 27: Advertising expenditure on savings and investment products for children, by advertiser (top ten), 2007/08-2009/10*
                                                                                • Companies tend to use a more targeted approach
                                                                                  • Figure 28: Advertising expenditure on savings and investment products for children, by media type, 2007/08-2009/10*
                                                                                • Government spending on CTF advertising declines
                                                                                  • Figure 29: Total amount spent by the government on advertising the CTF, by media type, 2004/05-2008/09*^
                                                                              • Channels to Market

                                                                                • Key points
                                                                                  • Children’s savings products need an online boost
                                                                                    • Partnerships were common in the CTF market
                                                                                      • Figure 30: List of CTF distributors, by the provider whom they are tied to, November 2010
                                                                                  • Amount Saved on Behalf of Children

                                                                                    • Key points
                                                                                      • Around three fifths of parents save for their children
                                                                                        • Figure 31: Amount saved on behalf of children, September 2010
                                                                                      • Affluent families are the primary – but not the only – target
                                                                                        • Figure 32: Amount saved on behalf of children, by demographics, September 2010
                                                                                    • Product Ownership

                                                                                      • Key points
                                                                                        • Possible confusion over investment types in the CTF sector
                                                                                          • Figure 33: Ownership of children's savings/investment products, September 2010
                                                                                        • The non-CTF market is about the same size again
                                                                                          • High earners are more likely to have a shares-based CTF
                                                                                            • Figure 34: Ownership of children's savings/investment products, by demographics, September 2010
                                                                                          • Homebuyers more likely to turn to equity investments
                                                                                            • Further evidence that affluent families are more engaged
                                                                                              • Figure 35: Number of different types of children's savings/investment products owned, by socio-economic group and gross annual household income, September 2010
                                                                                            • The non-CTF sector – secondary saving, but high value?
                                                                                              • Figure 36: Ownership of children's savings/investment products, by number of different types of children's savings/investment products owned, September 2010
                                                                                            • The CTF scheme has encouraged people to get into regular saving
                                                                                              • Figure 37: Ownership of children's savings/investment products, by amount saved on behalf of children, September 2010
                                                                                          • Reasons for Saving on Behalf of Children

                                                                                            • Key points
                                                                                              • Rising university fees could encourage more parents to save
                                                                                                • Figure 38: Reasons for saving on behalf of children, September 2010
                                                                                              • Launching accounts designed specifically for house purchase…
                                                                                                • Figure 39: Reasons for saving on behalf of children, by demographics, September 2010
                                                                                              • …or indeed, to help finance university
                                                                                                • High-value savers have very specific reasons for doing so
                                                                                                  • Figure 40: Reasons for saving on behalf of children, by most popular amount saved on behalf of children, September 2010
                                                                                                • CTF owners are more motivated by house purchase
                                                                                                  • Figure 41: Reasons for saving on behalf of children, by ownership of children's savings/investment products, September 2010
                                                                                              • Attitudes Towards the CTF Changes

                                                                                                • Key points
                                                                                                  • The CTF scheme has been largely successful…
                                                                                                    • Figure 42: Attitudes towards the CTF changes, September 2010
                                                                                                  • …although this is largely due to government contributions
                                                                                                    • Women may be the decision-makers in this sector
                                                                                                      • Figure 43: Attitudes towards the CTF changes, by demographics, September 2010
                                                                                                    • Evidence of cross-selling opportunities for high earners
                                                                                                      • Offering incentives to regular savers
                                                                                                        • Figure 44: Attitudes towards the CTF changes, by amount saved on behalf of children, September 2010
                                                                                                      • Attracting more enthusiastic savers in a different way
                                                                                                        • Figure 45: Attitudes towards the CTF changes, by ownership of children's savings/investment products, September 2010
                                                                                                    • Appendix – Amount Saved on Behalf of Children

                                                                                                        • Figure 46: Amount saved on behalf of children, by demographics, September 2010
                                                                                                    • Appendix – Product Ownership

                                                                                                        • Figure 47: Ownership of children's savings/investment products, by demographics, September 2010 (Table 1 of 3)
                                                                                                        • Figure 48: Ownership of children’s savings/investment products, by demographics, September 2010 (Table 2 of 3)
                                                                                                        • Figure 49: Ownership of children's savings/investment products, by demographics, September 2010 (Table 3 of 3)
                                                                                                        • Figure 50: Ownership of children's savings/investment products, by most popular ownership of children's savings/investment products, September 2010
                                                                                                    • Appendix – Reasons for Saving on Behalf of Children

                                                                                                        • Figure 51: Reasons for saving on behalf of children, by demographics, September 2010
                                                                                                    • Appendix – Attitudes Towards the CTF Changes

                                                                                                        • Figure 52: Attitudes towards the CTF changes, by demographics, September 2010 (Table 1 of 2)
                                                                                                        • Figure 53: Attitudes towards the CTF changes, by demographics, September 2010 (Table 2 of 2)

                                                                                                    Companies Covered

                                                                                                    • Alliance & Leicester
                                                                                                    • Bank of England
                                                                                                    • Barclays Bank plc
                                                                                                    • Bradford & Bingley plc
                                                                                                    • British Bankers' Association (BBA)
                                                                                                    • Cambridge Building Society
                                                                                                    • Cheltenham & Gloucester plc
                                                                                                    • Cheshire Building Society
                                                                                                    • Clydesdale Bank
                                                                                                    • Co-operative Group
                                                                                                    • Council of Mortgage Lenders
                                                                                                    • Darlington Building Society
                                                                                                    • Dunfermline Building Society
                                                                                                    • Family Assurance Friendly Society
                                                                                                    • Fidelity Investment Services Limited
                                                                                                    • Financial Services Authority (The)
                                                                                                    • Government Actuary's Department (GAD)
                                                                                                    • Hargreaves Lansdown Plc
                                                                                                    • HBOS plc (Halifax Bank of Scotland)
                                                                                                    • HSBC Private Bank (UK) Limited
                                                                                                    • Investment Management Association
                                                                                                    • Lloyds Banking Group
                                                                                                    • Mansfield Building Society
                                                                                                    • Midas Investment Management Ltd
                                                                                                    • Monmouthshire Building Society
                                                                                                    • National Childbirth Trust
                                                                                                    • Nationwide Building Society
                                                                                                    • NatWest
                                                                                                    • Newcastle Building Society Limited
                                                                                                    • Northern Bank Ltd
                                                                                                    • Royal Bank of Scotland Group plc
                                                                                                    • Sainsbury's Bank
                                                                                                    • Scottish Widows Investment Partnership Ltd
                                                                                                    • Skipton Building Society
                                                                                                    • Witan Investment Trust
                                                                                                    • Yorkshire Bank PLC

                                                                                                    Saving and Investing for Children - UK - December 2010

                                                                                                    £1,995.00 (Excl.Tax)