§ The Financial Secretary to the Treasury (Ruth Kelly)
The Child Trust Funds Bill will ensure that every child, whatever their family background, will have access at the age of 18 when they begin their adult life to a stock of assets which they can invest in their future. The child trust fund will also help children and their parents to understand the benefits of saving and investment and how to engage with financial institutions.
The Government are today publishing draft child trust fund regulations. These draft regulations will be of particular interest to potential providers of the child trust fund.
The draft regulations include the requirements for a stakeholder child trust fund account. Every child trust fund provider will make a stakeholder account available as one of the investment options. A stakeholder child trust fund account will have its charges capped at 1.5 per cent. per year, and providers will be required to accept all contributions of £10 and above. No charges will apply to transfers between different types of accounts, including from stakeholder to non-stakeholder, and between providers.
The Government's decision on the charge cap is in the best interests of consumers, as it encourages as wide a selection of providers as possible to offer child trust fund accounts. A large number of providers will encourage competition and ensure the best value for consumers. The Government will continue to monitor that the level of the charge cap best meets the interests of consumers.
The decision was evidence-based and considered the particular characteristics of the child trust fund. The economics of the child trust fund are very different to other financial products, such as the stakeholder pensions. In particular child trust fund accounts will be smaller in terms of the average size of funds compared to pensions and will have a lower minimum contribution level than other stakeholder products.
The evidence on which the decision for the cap was based included the report commissioned by the Government from Deloitte, which looked at the trade-offs of different charge caps for providers and consumers. Deloitte's report will be published later this year, at the same time as their report on the other products in the stakeholder suite.
The minimum contribution for the stakeholder account has been set to ensure the child trust fund is accessible to all savers, including those who cannot commit to regular contributions. Providers will be free to accept lower contributions if they wish and it is expected that competition amongst providers could drive down the minimum amounts accepted.26WS
The Government will continue to work with the Financial Services Authority on the development of an appropriate regulatory regime.
Copies of the draft regulations together with an explanatory commentary are available in the Vote Office and the Libraries of the House.