The child trust fund in the UK: how might opening rates by parents be increased?

The UK has recently seen the introduction of the Child Trust Fund (CTF). All babies born from September 2002 receive either a 250 or 500 endowment from government, with children from low-income families qualifying for the higher endowment. Parents are crucial for this policy. They are supposed to open an account for their child and will make key decisions about saving and investment. However, important issues confront parents. Around a quarter of parents leave CTF accounts unopened. I examine how opening rates might be increased, drawing in particular on recent work in behavioral economics. I suggest that policy ought to focus on reforms combining behavioral economics with steps to improve financial capability. (C) 2010 Elsevier Ltd. All rights reserved.