Parents say they will do anything to give their children a head start - so why have so many failed to sign up for Child Trust Funds, asks Andrew Bryson...
Child Trust Funds were announced before the 2001 General Election to wide acclaim.
They kicked in this April with each baby receiving a voucher for £250 - doubled for children in low-income families - which can be invested in cash or shares.
Parents and relatives are encouraged to top up the fund with regular payments, and the lump sum only becomes available to the child on their 18th birthday.
With regular top-ups, some lucky children could come of age with a five-figure sum. As well as setting the next generation on a sound financial footing, the scheme was praised for promoting financial literacy and encouraging a culture of saving, amongst parents as well as children.
When the first vouchers were sent out this January, entitlement was back-dated, to September 2002, meaning 1.7 million more babies qualified.
The idea of a mass hand-out to newborns was a popular one, especially coming from Gordon Brown - a Chancellor often seen as tight-fisted when it comes to the money in people's pockets, if not the public purse.
But 11 months after the first vouchers were sent out, takeup is hovering just above 50 per cent. With 2.1million vouchers sent out, only 1.1 million Child Trust Funds (CTFs) have been opened.
The parents of 971,000 children have not yet banked the cheque. At £250 per child, that works out at £242 million of unclaimed money. That amount could be much higher: the Citizens Advice Bureau say the lowest takeup is associated with low income groups where vouchers can be worth £500. Financially literate high-earners have already opened their childrens' accounts.
The Government prefers to draw more positive conclusions from the scheme so far.
An HM Revenue and Customs spokesman said: "Given that the Child Trust Fund is a new policy which has been running only since April, we are delighted that more than one million accounts have been opened and we see that as a real success.
"Some sections of the media see that as a glass half empty, but we see it very much as a glass half full.
"Particularly considering that a lot of the parents who are receiving vouchers may not have had exposure to financial products like shares or investments before themselves."
Yet as the months go by, takeup seems to be falling. A TV advertising campaign at the beginning of the year prompted a surge of new accounts, but sales of CTFs have "lost momentum" since the summer, says the British Savings Association.
Brian Morris, head of savings policy at the BSA, said: "The number of accounts opened in October - about 26,000 - is the lowest for any month so far, which is disappointing.
"Many parents have still not invested their CTF vouchers and children are missing out as a result."
October's total is down 5,000 on September. With 60,000 new born babies arriving each month, that means less than half of parents are now taking the time to bank the cheque. Why are parents turning down free money?
Lack of financial literacy may be a part. Long term investments like the Child Trust Fund can be complex - parents must choose between three investment options and dozens of registered providers.
Funds can be set up as a basic cash savings account -only offered by a handful of providers - or a more aggressive shares option. A third way promoted by Government is the 'stakeholder' vehicle, with a 'lifestyling' component, gradually switching from equity to fixed income components as the fund matures.
No wonder some parents are left scratching their heads. Elise Cross, spokesperson for the Citizens Advice Bureau, explains: "The evidence we have is that the low takeup of Child Trust Funds is patterned on low income groups.
"Many of the people in these income groups have very little experience in investment products. Some people don't even have bank accounts. If they are only used to managing cash then investing for the long term may not seem like a high priority.
"We are doing work at the Citizens Advice Bureau to encourage financial literacy and to encourage the takeup of benefits which people are entitled to, like the Child Trust Fund and pensions credit for elderly people.
"But the Child Trust Fund is still very new and people have got to get used to it."
Some of the vouchers may simply have been lost or misdirected. Any family claiming Child Benefit - 98 per cent of families, by one estimate - will receive vouchers so some are bound to go astray. Parents with poor English and literacy are also likely to miss the opportunity.
If after 12 months parents have not used the voucher to set up a Child Trust Fund on their own, the Treasury will open one on the child's behalf. ..SUPL: