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Saving Products for Children - UK - December 2011

“The closure of Child Trust Funds is likely to disrupt the children’s savings and investing market, particularly in the short term. However, Junior ISAs have the potential to invigorate the market and are likely to become one of the most popular products in the future. In order for this to happen, the government needs to launch a public campaign promoting the new product in order to increase consumer awareness and product ownership.”

– Stevan Obradovic, Financial Services Analyst

Some questions answered in this report include:

  • What impact will the closure of Child Trust Funds have on the market?
  • Can the newly launched Junior ISAs invigorate the children’s savings and investing sector?
  • How can product providers use technology to increase engagement with parents and children?
  • Are high levels of inflation and low interest rates discouraging parents from saving for their children?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • The market
            • Non-CTF products are the most popular among parent savers
              • Figure 1: Preferred products for children's savings, October 2011
            • Market factors
              • Child Trust Funds are replaced by Junior ISAs
                • Major banking groups have overlooked Junior ISAs
                  • Low interest rates and high inflation are eroding savings returns
                    • Figure 2: UK inter-bank, three-month rate+ and selected UK bank rates*, January 2001-September 2011
                  • Childbirth rates have been on the up since 2005
                    • Figure 3: Total number of newborn children in the UK, 2005-10
                  • Companies, brands and innovation
                    • Lloyds Banking Group is likely to have the largest share of children’s savings accounts
                      • Family Investments and The Children’s Mutual are the leading CTF providers
                        • Brand promotion
                          • Who’s innovating
                            • The consumer
                              • Saving on behalf of children
                                • Figure 4: Saving on behalf of children, October 2011
                              • Amount saved on behalf of children
                                • Figure 5: Amount saved, October 2011
                              • Reasons for saving on behalf of children
                                • Figure 6: Reasons for saving on behalf of children, October 2011
                              • Awareness of CTF changes and Junior ISAs
                                • Figure 7: Awareness of CTF changes, October 2011
                                • Figure 8: Junior ISA awareness, October 2011
                              • What we think
                              • Issues in the Market

                                  • What impact will the closure of Child Trust Funds have on the market?
                                    • Can the newly launched Junior ISAs invigorate the children’s savings and investing sector?
                                      • How can product providers use technology to increase engagement with parents and children?
                                        • Are high levels of inflation and low interest rates discouraging parents from saving for their children?
                                        • Future Opportunities

                                          • Engaging children through digitalisation
                                            • Education-based products could appease parental concerns
                                            • Internal Market Environment

                                              • Key points
                                                • Child Trust Funds close to new participants in January 2011…
                                                  • …replaced by Junior ISAs in November 2011
                                                    • The government will make a contribution for children in care
                                                      • Junior ISAs have been overlooked by the major banks
                                                        • Bank of England base rate remains at historical low of 0.5%
                                                          • Figure 9: UK inter-bank, three-month rate+ and selected UK bank rates*, January 2001-September 2011
                                                        • UK savings ratio has fallen since 2009 but still significantly higher than pre-recession levels
                                                          • Figure 10: UK savings ratio, 2005-11
                                                      • Broader Marker Environment

                                                        • Key points
                                                          • Equities tend to yield higher returns in the long term
                                                            • Figure 11: Performance of the FTSE 100 index, January 2006-October 2011
                                                          • Annual childbirth rates have increased by 12% between 2005 and 2010
                                                            • Figure 12: Total number of newborn children in the UK, 2005-10
                                                          • A large number of children that did not qualify for a CTF will be eligible for Junior ISAs
                                                            • Figure 13: Number of children of each age in the UK, 2006-10
                                                          • Children are most likely to receive between £2 and £5 per week
                                                            • Figure 14: Amount of money received by children per week, September 2011
                                                          • A fifth of kids save the money they receive and earn
                                                            • Figure 15: How children spend their money, September 2011
                                                        • SWOT Analysis

                                                            • Figure 16: Savings products for children – SWOT analysis, 2011
                                                        • Who’s Innovating?

                                                          • Key points
                                                            • Junior ISA offerings led by The Children’s Mutual and Family Investments
                                                              • Ethical funds lead the Junior ISA innovation race
                                                                • Family Investments and Bounty partnership launches Junior Bond
                                                                  • Nationwide launches three new children’s savings products
                                                                    • Child SIPPs available through Alliance Trust Savings
                                                                    • Market Size

                                                                      • Key points
                                                                        • Non-CTF products are used by the majority of parents
                                                                          • Figure 17: Preferred products for children's savings, October 2011
                                                                        • CTF voucher conversions set to fall in 2011
                                                                          • Figure 18: Number of CTF vouchers issued and accounts opened by parents, Q1 2005-Q2 2011
                                                                      • Market Share

                                                                        • Key points
                                                                          • Family Investments and The Children’s Mutual are the two largest CTF providers
                                                                            • Figure 19: Number of organisations authorised to offer CTF accounts, 2009 and 2010
                                                                          • Parallels can be made with the adult savings market
                                                                            • Figure 20: Savings account ownership, by provider, February 2011
                                                                        • Companies and Products

                                                                          • Family Investments
                                                                            • The Children’s Mutual
                                                                              • Lloyds Banking Group
                                                                                • Nationwide
                                                                                  • NS&I (National Savings & Investments)
                                                                                    • Santander
                                                                                      • Barclays
                                                                                        • HSBC
                                                                                          • RBS
                                                                                          • Brand Communication and Promotion

                                                                                            • Key points
                                                                                              • Adspend falls by 22% in the year to August 2011
                                                                                                • Figure 21: Topline advertising expenditure on savings and investment products for children, 2008/09-2010/11*
                                                                                              • Top ten advertisers account for the majority of adspend
                                                                                                • Figure 22: Advertising expenditure on savings and investment products for children, by advertiser (top ten), 2008/09-2010/11*
                                                                                              • Press is the most popular method of advertising
                                                                                                • Figure 23: Advertising expenditure on savings and investment products for children, by media type, 2008/09-2010/11*
                                                                                              • CTF advertising falls sharply in the last year
                                                                                                • Figure 24: Topline advertising expenditure on Cash CTFs (Child Trust Fund), 2008/09-2010/11*
                                                                                              • Lack of government and industry campaigns about Junior ISAs
                                                                                              • Channels to Market

                                                                                                • Key points
                                                                                                  • CTF market benefited from provider and distributor partnerships…
                                                                                                    • Figure 25: List of CTF distributors, by the provider whom they are tied to, December 2011
                                                                                                  • ...and so could Junior ISAs
                                                                                                    • Scope for online boost as internet usage increases
                                                                                                    • Saving on Behalf of Children

                                                                                                      • Key points
                                                                                                        • Parents are the most likely to save for their children
                                                                                                          • Figure 26: Saving on behalf of children, October 2011
                                                                                                        • Two thirds of parents try to save on at least a monthly basis…
                                                                                                          • Figure 27: Frequency of saving among parents, October 2011
                                                                                                        • …and almost half of grandparents follow suit
                                                                                                          • Figure 28: Frequency of saving among grandparents, October 2011
                                                                                                        • Affluence has a big impact on the ability to save for children
                                                                                                          • Figure 29: Saving on behalf of children, by socio-economic group and gross annual household income, October 2011
                                                                                                        • Renting is restricting parents’ ability to save for children
                                                                                                          • Figure 30: Saving on behalf of children, by household tenure and size, October 2011
                                                                                                      • Amount Saved on Behalf of Children

                                                                                                        • Key points
                                                                                                          • 35% of parents save less than £20 per month…
                                                                                                            • Figure 31: Amount saved, October 2011
                                                                                                          • …and few will be able to take advantage of the increased CTF and Junior ISA contribution limit
                                                                                                            • Over-45s are more likely to save larger amounts and on an ad-hoc basis
                                                                                                              • Figure 32: Amount saved, by gender and age, October 2011
                                                                                                            • Flexible savers more likely to prioritise birthdays and Christmas
                                                                                                              • Figure 33: Frequency of saving among parents, by amount saved, October 2011
                                                                                                          • Product Ownership

                                                                                                            • Key points
                                                                                                              • Children’s savings accounts are the most popular product in the market
                                                                                                                • Figure 34: Preferred products for children's savings, October 2011
                                                                                                              • Confusion among parents when it comes to Child Trust Funds
                                                                                                                • Junior ISAs could benefit from ISA popularity among the adult population
                                                                                                                  • Around 70% of parent savers use one type of product…
                                                                                                                    • Figure 35: Preferred products for children’s savings, by the number of products owned, October 2011
                                                                                                                  • …while a quarter use two or more savings products
                                                                                                                    • Parent savers using CTFs contribute more often…
                                                                                                                      • Figure 36: Frequency of saving among parents, by preferred products for children's savings, October 2011
                                                                                                                    • …and larger amounts than those using other products
                                                                                                                      • Figure 37: Amount saved, by preferred products for children's savings, October 2011
                                                                                                                  • Reasons for Saving on Behalf of Children

                                                                                                                    • Key points
                                                                                                                      • Parents are mainly motivated to save for university/education costs and encouraging their children to save
                                                                                                                        • Figure 38: Reasons for saving on behalf of children, October 2011
                                                                                                                      • The majority of parents want their children to spend savings in a certain way
                                                                                                                        • University/education costs are the main priority of higher-value savers
                                                                                                                          • Figure 39: Reasons for saving on behalf of children, by amount saved, October 2011
                                                                                                                        • Parents with CTFs are more likely to have a long-term savings goal
                                                                                                                          • Figure 40: Reasons for saving on behalf of children, by preferred products for children's savings, October 2011
                                                                                                                      • Awareness of CTF Changes and Junior ISAs

                                                                                                                        • Key points
                                                                                                                          • Parents are split on awareness about Child Trust Fund closure
                                                                                                                            • Figure 41: Awareness of CTF changes, October 2011
                                                                                                                          • CTF contributors are much more aware about market changes
                                                                                                                            • Figure 42: Awareness of CTF changes, by preferred products for children's savings, October 2011
                                                                                                                          • Awareness about Junior ISAs replacing CTFs is very low…
                                                                                                                            • Figure 43: Junior ISA awareness, October 2011
                                                                                                                          • …and remains relatively unchanged by product ownership
                                                                                                                            • Figure 44: Junior ISA awareness, by preferred products for children's savings, October 2011
                                                                                                                          • Link between awareness of Junior ISAs and closure of CTFs
                                                                                                                            • Figure 45: Awareness of CTF changes, by junior ISA awareness, October 2011
                                                                                                                        • Appendix – Saving on Behalf of Children

                                                                                                                            • Figure 46: Saving on behalf of children, by demographics, October 2011
                                                                                                                        • Appendix – Amount Saved on Behalf of Children

                                                                                                                            • Figure 47: Amount saved, by demographics, October 2011
                                                                                                                        • Appendix – Product Ownership

                                                                                                                            • Figure 48: Preferred products for children's savings, by demographics, October 2011
                                                                                                                            • Figure 49: Repertoire of preferred products for children's savings, by demographics, October 2011
                                                                                                                        • Appendix – Reasons for Saving on Behalf of Children

                                                                                                                            • Figure 50: Reasons for saving on behalf of children, by demographics, October 2011
                                                                                                                        • Appendix – Awareness of CTF Changes and Junior ISAs

                                                                                                                            • Figure 51: Awareness of CTF changes, by demographics, October 2011
                                                                                                                            • Figure 52: Junior ISA awareness, by demographics, October 2011

                                                                                                                        Companies Covered

                                                                                                                        • Alliance & Leicester
                                                                                                                        • Bank of England
                                                                                                                        • Barclays Bank plc
                                                                                                                        • Bradford & Bingley plc
                                                                                                                        • Cheltenham & Gloucester plc
                                                                                                                        • Clydesdale Bank
                                                                                                                        • Coventry Building Society
                                                                                                                        • Family Assurance Friendly Society
                                                                                                                        • Grupo Santander Central Hispano S.A.
                                                                                                                        • HBOS plc (Halifax Bank of Scotland)
                                                                                                                        • HSBC Private Bank (UK) Limited
                                                                                                                        • Lloyds Banking Group
                                                                                                                        • Nationwide Building Society
                                                                                                                        • NatWest
                                                                                                                        • Post Office Limited
                                                                                                                        • Royal Bank of Scotland Group plc
                                                                                                                        • Sainsbury's Bank
                                                                                                                        • Scottish Widows Investment Partnership Ltd
                                                                                                                        • Twitter, Inc.
                                                                                                                        • Yorkshire Bank PLC
                                                                                                                        • YouTube, Inc.

                                                                                                                        Saving Products for Children - UK - December 2011

                                                                                                                        £1,750.00 (Excl.Tax)