The children’s saving and investment market continues to endure a challenging time with ongoing pressure on household budgets. Despite inflation slowly edging downward in early 2014, Mintel data show that parents’ outlook for the coming year is still dampened by the income squeeze, which inevitably affects their ability to save, both for themselves and for their children. While cash-based savings products dominate the children’s savings market, outside of children’s savings accounts, Child Trust Funds (CTFs) and Junior ISAs, very few other products are used by parent savers.

Despite a gradual increase in sales since their launch over two years ago, Junior ISAs still have a limited market penetration, with children’s savings accounts and CTFs being the most widely owned products in the market. Consumer research reveals a significant lack of awareness of the new product among parents, which, together with the drastic decline in advertising expenditure on Junior ISAs, may explain its slow uptake. Meanwhile, parental desire to save for their children remains strong with more than three in five parents contributing to children’s savings regularly. At the same time, children exhibit a keen interest in saving, revealing an opportunity for both parents and providers to offer the necessary guidance and support to the new generation of young savers.

This report examines these developments and other trends in the children’s saving and investment market, as well as their implications for providers. Drawing on a range of information sources, it provides an overview of how the market is evolving, as well as recent provider activity, identifying where opportunities for growth may exist. Mintel’s exclusively commissioned consumer research also explores parental saving behaviour, providing insight into attitudes and intentions.

Report scope and product definitions

The focus of this report is on the market for children’s saving and investment. Although reference is made to retail savings accounts for the adult market, these products are not covered extensively here, but form the focus of a separate Mintel report: Deposit and Savings Accounts – UK – April 2014.

In addition to traditional children’s savings accounts, there are also tax-free savings products introduced by the government and available to UK consumers:

  • Child Trust Funds (CTFs) – savings and investment accounts introduced by the Labour Government in January 2005, with the aim to ensure every child has savings at the age of 18. Eligible children born on or between 1 September 2002 and 2 January 2011 received an initial subscription from the government in the form of a voucher for at least £250. Family and friends could then pay into the funds up to a legal limit for the tax year (£3,840 for 2014/15). CTFs are held in trust by the parents or legal guardians of the child and any gains or dividends are tax-free. Creation of new funds and government payments into these accounts ended in January 2011 and CTFs were replaced by Junior ISAs. Although new accounts cannot be created, existing ones can still receive new money. In December 2013, Chancellor George Osborne announced that from April 2015 transfers from CTFs to Junior ISAs will be allowed so children who currently hold a CTF will get access to both products.

  • Junior ISAs – tax-free savings accounts which have been available since 1 November 2011 to children under the age of 18 who do not own a Child Trust Fund account. Junior ISAs act similarly to cash ISAs in that they are saving and investment accounts which shield any cash growth from both income and capital gains tax. Unlike Child Trust Funds, the government does not make any contributions into Junior ISAs and unlike adult ISAs, 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. Adult cash ISAs are available to children from the age of 16, and eligible children can hold both a cash Junior ISA as well as an adult cash ISA from that age. The Junior ISA annual contribution limit for 2014/15 is £3,840 and will increase to £4,000 from 1 July 2014. Children can have a cash as well as a stocks and shares account and the contribution limit can be divided in any fashion between the two.

In the UK the main providers of children’s savings and investment products are the high street retail banks and building societies, along with investment providers such as Family Investments, The Children’s Mutual and NS&I which offer CTFs, Junior ISAs and children’s bonds.

Abbreviations

ACORN A Classification of Residential Neighbours
AER Annual Equivalent Rate
CPI Consumer Price Index
CTF Child Trust Fund
FLS Funding for Lending Scheme
GDP Gross Domestic Product
HBOS Halifax Bank of Scotland (part of Lloyds Banking Group)
HMRC HM Revenue & Customs
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