Memorandum submitted by Contact a Family
Contact a Family is a charity providing support,
advice and information to families with disabled children across
the UK. Each year we advise over 18,000 families and a further
100,000+ visit our website. We are very supportive of the Child
Trust Fund scheme and have promoted it in on our website and in
our newsletters.
However, we believe there is one particular
issue at a broad policy level which we welcome the opportunity
to raise with the Select Committee.
We are allowed to give advice on most topics,
being Community Legal Service approved for advice at general help
level; registered with the Office of the Immigration Service Commissioner
and covered by Advice Uk's group licence for money advice/debt
counselling. However, we are not allowed to give financial advice
which involves recommending a particular product type or identifying
a specific product to buy, since these are regarded as forms of
advice regulated by the Financial Services Authority. Such advice
is provided by qualified financial advisers.
Our experience with parents of disabled children
suggests why they may not be using their Child Trust Fund vouchers.
55% of disabled children grow up in or on the margins of poverty.
Their families have lower incomes and higher expenses. It is not
so much that they are unaware of the existence of the Child Trust
Fund but that they are finding it difficult to decide which product
would be best for them. Like most people faced with a bewildering
choice full of technical terms that they do not understand, they
simply put the paperwork behind the clock and do nothing. This
may well not be in their best interests. Most Independent Financial
Advisers are not going to be very interested in providing financial
advice on an investment of £250-£500, since they will
not make much if any commission on this and it would not be worth
the parents' while paying a fee for advice on such a small sum,
even if they could afford it. This might explain why a scheme
to provide incentives to the poorest families to start saving
has in practice only been taken up by the educated and well off.
We believe that HM Treasury should pilot schemes
to fund IFAs to be based in voluntary organisations such as Contact
a Family's national freephone helpline to help parents make the
best choice from the available products. This would open up access
to financial advice to low income families. That way there would
be no question of fees or commission to put people off and families
already trust organisations such as Contact a Family to give them
good advice on all other areas of their lives.
4 November 2005
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