Saving Products for Children - UK

During the last few years, the children’s savings market has become an increasingly prominent sector of the financial services industry. The advent of the Child Trust Fund (CTF) has undoubtedly been the catalyst that has raised the profile of children’s savings, both across the consumer base in general and within the financial services market in particular.

The next few years are sure to see further developments within this market that should facilitate further innovation in terms of product development, branding and distribution as children’s savings providers compete for an increased share of this growing market.

This report provides an assessment of recent trends within this sector. It considers the prospects for future growth, produces an estimate of the total market size and reports industry views on a range of salient issues. In addition, it provides an analysis of Mintel’s independently commissioned consumer research, which identifies the proportion of adults who are saving for children and how frequently they are doing so; establishes penetration rates for different types of savings and investment products; and gauges consumer reaction to the CTF and a number of other issues relating to children’s savings.

Issues in the Market

Main findings of the research

Abbreviations

Market in Brief

A variety of factors are driving demand for children’s savings

The children’s savings market has grown in the last few years

Trade perspective: CTF has raised the profile of children’s savings

Mintel’s research findings: Product ownership

Mintel’s research findings: Attitudes towards saving for children

Mintel’s research findings: Targeting opportunities

Broader Market Environment

Key points

The fertility rate now stands at its highest level in 26 years

Figure 1: Total fertility rate in the UK, 1960-2006

The total number of children in the UK is projected to rise

Figure 2: UK population projections, by age, 1997-2027

Household patterns have changed considerably in last few decades

Figure 3: Households, by type of household and family, Great Britain, 1971-2006

The growth of the lone parent

Figure 4: Dependent children, by family type, Great Britain, 1972-2006

Lone-parent families tend to save less than couple families

Figure 5: Distribution of savings, by family status and amount of savings, 2005/06

The overall savings ratio remains at an historically low level

Figure 6: Personal disposable income, consumer expenditure and the savings ratio, 2002-12

Any further rise in Child Benefit would also have a positive impact

Figure 7: Rates of Child Benefit, 1995-2007

Pocket money trends could also boost children’s savings

Heightened need for children to save will boost the market

A farewell to alms

The pension problem

The housing problem

Internal Market Environment

Key points

The CTF is having a major impact on children’s savings market

The low-down on the CTF

This initiative will inevitably boost the number of child savers

The CTF could become a catalyst for developing a savings culture

CTF success could dampen demand for ‘traditional’ products

Low nominal interest rates tend to constrain deposit-based growth

Figure 8: Bank of England base rate, end of quarter, 1972-2007

A strong stock market has boosted equity-based products…

Figure 9: FTSE 100 index, last working day of each month, 1994-2007

… but market turbulence could hit future sales

Competitive Context

Key points

Standard savings products are sometimes used to save for children

Adult savings and debt repayments could hit children’s savings

Presents could also be classed as a ‘competitor’

Strengths and Weaknesses in the Market

Strengths

Weaknesses

Market Size and Forecast

Key points

Almost 13 million adults hold savings products for a child

Figure 10: Estimated number of adults owning children’s savings and investment products, 2003 and 2007

On the downside

3 million CTF accounts have now been opened…

Figure 11: Number of Child Trust Fund vouchers issued and accounts opened by parents, 2005-07

…but plenty of parents have left it to the experts

Three quarters of all CTF accounts are stakeholder versions

Figure 12: Child Trust Fund breakdown, by type of account and asset value, April 2007

One in four CTF accounts have received extra contributions

Figure 13: Child Trust Fund contributions, by account type, April 2007

More than a fifth of CTF accounts are worth £600 or more

Figure 14: Child Trust Fund market values, by account type, April 2007

The total amount saved on behalf of children is around £11 billion

Forecast

Assumptions

Potential to bring 3.5 million new savers into the market

Figure 15: Market forecast for children’s savings products, 2003-2011

Two key target groups

Figure 16: Identified target groups within total population, 2007

How the 3.5 million potential future savers were estimated:

Market Share

Key points

Family Investments is the leading provider of CTF accounts

Family Investments - a look at the leader

The Children’s Mutual

Four providers account for six in ten children’s savings accounts

Companies and Products

Key points

The children’s savings market covers a diverse product range

Child Trust Fund accounts

Savings deposit accounts

National Savings & Investments products

Tax-exempt children’s savings plans

Other equity-based products

Pensions

A broad range of organisations operate within this sector

The mutual sector accounts for the majority of CTF providers

Figure 17: List of organisations approved to provide CTF accounts, September 2007

Brand Communication and Promotion

Key points

The government has spent almost £11 million promoting the CTF

A major campaign

Figure 18: Total amount spent by the government on advertising the CTF, by media type, 2004/05-2006/07

From small seeds…

Total industry adspend amounted to £1.2 million in last 12 months

Figure 19: Advertising expenditure on children’s savings and investment products, 2002/03-2006/07

Declining spend

The press accounts for the largest proportion of expenditure

Figure 20: Advertising expenditure on children’s savings and investment products, by media type, 2005/06 and 2006/07

Investment firms top the children’s savings adspend chart

Figure 21: Advertising expenditure on children’s savings and investment products, by organisation, 2005/06 and 2006/07

A friendly word in your ear

Channels to Market

Key points

Various channels are used to distribute children’s savings products

Some CTF providers work with a wide array of distributors

Figure 36: List of CTF distributors, by provider organisation they are working with, September 2007

Affinity partnerships can be used to generate new custom

The Internet is becoming an increasingly important channel

The Consumer - Product Ownership

Key points

Survey background

One in eight consumers regularly save for their own children

Figure 37: Frequency of saving or investing for children, by relationship to child, July 2007

A total of 15 million adults are saving for a child’s future

Figure 38: Proportion of adults saving or investing for children, July 2007

Figure 39: Profile overview of adults saving or investing for children, July 2007

C2 aspirations

Family savings analysis

Figure 40: Frequency of saving or investing for own children by parents at the family lifestage, by gender, age, socio-economic group, income and newspaper readership, July 2007

CTF accounts are the most commonly held children’s products

Figure 41: Types of saving and investment products held for or on behalf of children, July 2007

Deposit-based savings

Three quarters of parents with under-5s hold a CTF account

Figure 42: Types of saving and investment products held for or on behalf of children, by age of own children in household, July 2007

The CTF effect

NS&I products are a popular choice with grandparents

Figure 43: Types of saving and investment products held for or on behalf of children, by relationship to child, July 2007

The Consumer - Attitudes towards Saving for Children

Key points

A large majority of adults feel children need to have savings

Figure 44: “It is essential children have savings for when they are older”, July 2007

All those against

Here’s to absent presents

Figure 45: “It is a good idea to spend less on presents and instead save more for the future”, July 2007

The present profile

Most respondents feel the CTF will encourage parents to save

Figure 46: “The Child Trust Fund will help parents get into the savings habit”, July 2007

Hitting the gaps in the market?

Most families with young children have faith in the CTF

The CTF is also expected to get children into the savings habit

Figure 47: “The Child Trust Fund will help children get into the savings habit”, July 2007

Creating a savings habit among non-savers?

Most mid-income households feel the CTF will boost savings

Appendix

Proportion of adults saving for children

Figure 55: Proportion of adults saving or investing for children, by gender, age, socio-economic group and age/socio-economic group, July 2007

Figure 56: Proportion of adults saving or investing for children, by lifestage, Mintel’s Special Groups, detailed family lifestage and marital status, July 2007

Figure 57: Proportion of adults saving or investing for children, by working status, income, TV region and newspaper readership, July 2007

Product ownership

Figure 58: Types of saving and investment products held for or on behalf of children, by gender, age, socio-economic group and TV region, July 2007

Figure 59: Types of saving and investment products held for or on behalf of children, by lifestage, Mintel’s Special Groups, working status and income, July 2007

Importance of children’s savings

Figure 60: “It is essential children have savings for when they are older”, by gender, age, socio-economic group and age/socio-economic group, July 2007

Figure 61: “It is essential children have savings for when they are older”, by TV region, income, lifestage and detailed family lifestage, July 2007

Presents or cash?

Figure 62: “It is a good idea to spend less on presents and instead save more for the future”, by gender, age, socio-economic group and age/socio-economic group, July 2007

Figure 63: “It is a good idea to spend less on presents and instead save more for the future”, by TV region, income, lifestage and detailed family lifestage, July 2007

Impact on parents’ savings habits

Figure 64: “The Child Trust Fund will help parents get into the savings habit”, by gender, age, socio-economic group and age/socio-economic group, July 2007

Figure 65: “The Child Trust Fund will help parents get into the savings habit”, by TV region, income, lifestage and detailed family lifestage, July 2007

Impact on children’s savings habits

Figure 66: “The Child Trust Fund will help children get into the savings habit”, by gender, age, socio-economic group and age/socio-economic group, July 2007

Figure 67: “The Child Trust Fund will help children get into the savings habit”, by TV region, income, lifestage and detailed family lifestage, July 2007

Attitudes towards saving for children

Figure 68: Level of agreement with various statements relating to saving for children, July 2007

Figure 69: Level of agreement with various statements relating to saving for children, by relationship to child, July 2007