What you need to know

Overall retail savings deposits have been given a boost, as a result of changing consumer behaviour linked to the effects of COVID-19. This is despite dismally low saving rates and the fact that a large swathe of the population has seen their incomes and their personal wealth contract over the past few months. However, offsetting both these trends is the significant curtailment in people’s ability to spend.

While many households with children have been hit financially and are struggling to make ends meet, parents who are saving for their children on a regular basis are generally keen to maintain this commitment. Mintel’s research – conducted in April 2020 – shows that three in five parents intend to increase the amount they are saving or investing for their children within the next 12 months. In addition, approximately one in eight parents have aspirations to start saving or investing for their offspring over the coming year.

The outbreak of the pandemic also saw global stock markets post the biggest falls since the 2008 financial crisis. Just as then, it will take many months before markets recover. Nevertheless, parents whose children hold an equity-based CTF or Junior ISA are unlikely to transfer money out of these products. Instead, with time on their side, most will ride out the turbulence and hope to regain the value they have lost. As for new investment, the picture is more mixed.

Mintel’s research reveals a large group of parents who are interested in investing, or investing more, in the stock market for the benefit of their children. Disenchantment with low savings rates and a desire to take advantage of lower fund prices will prompt some parents to take the leap, by either transferring a proportion of their child’s existing cash savings to a Junior Stocks & Shares ISA or by starting to make regular contributions to one. However, many others will be put off by the heightened volatility and still more will procrastinate – at least until the markets seem more settled and confidence returns.

Key issues covered in this Report

  • The impact of COVID-19 on saving and investment behaviour among parents.

  • What proportion of parents are saving for children, and what proportion are doing so regularly.

  • Products used to save or invest for children.

  • How parents help their children understand the value of money and money matters.

  • What parents expect their children will do with their Child Trust Fund when it matures.

Products covered in this Report

This Report explores the overall landscape for saving and investing for children, focusing on the behaviours and attitudes towards saving in this category. The section Size of the Children’s Savings Market analyses the number of people saving on behalf of children, including the proportion saving on a regular and infrequent basis.

The main products included in the analysis of the Report include:

  • CTFs (Child Trust Funds) were launched in 2005 and made available to all children born in the UK between 1 September 2002 and 2 January 2011(hence, the first of these will mature in September 2020). Eligible children received an initial contribution from the government in the form of a voucher for £250 (lower-income families could receive £500). The scheme was withdrawn in 2010 for children born after 2 January 2011 and 6.3 million vouchers were issued. The child can take control of their CTF at age 16, but cannot withdraw any money until age 18.

  • Junior ISAs (Individual Savings Accounts) were introduced on 1 November 2011 to replace CTFs. Individuals must be aged 16 and a UK resident to open a Junior ISA on behalf of a child, or be a child aged 16 but under 18 to open one themselves. The child must not already have a CTF, although they can transfer a CTF into a Junior ISA. A child can open a cash and a stocks and shares account but cannot hold more than one account of the same type. The savings in a Junior ISA account cannot be withdrawn until the child reaches 18. Only then can the savings either be withdrawn or the balance transferred into an adult ISA. The Junior ISA limit is £9,000 for the 2020/21 tax year, having more than doubled from £4,368 in the previous tax year. Children aged 16 or 17 can have both a Junior ISA and an adult cash ISA (which has an annual limit of £20,000).

  • Children’s savings accounts – there are various types, including easy access accounts, regular savings accounts and fixed-term accounts or bonds. They tend to operate in the same way as adult savings accounts and are predominantly offered by banks and building societies. Some children’s savings accounts allow the child, if aged seven or above, to operate the account themselves, including the ability to deposit and withdraw money.

  • Other products used by parents and others to invest for children include tax-exempt children’s savings plans offered by friendly societies and Premium Bonds and Children’s Bonds offered by NS&I (National Savings & Investments). However, NS&I withdrew its Children’s Bonds from sale in September 2017, when it launched a Junior ISA.

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