Examination of Witnesses (Questions 120-139)|
22 NOVEMBER 2006
Q120 Chairman: You were asked in
the Spending Review as a target to ensure that 100% of services
were offered on-line. You have not answered that question. You
have said 97% of transactions are done online. What I am trying
to get at is what is the correct percentage applying to services.
Mr Gray: I think Stephen has given
the answer there, that in terms of the product lines and services
that we offer there are six of them for which there is not an
Q121 Chairman: What is the percentage?
Six out of what100, 1,000, 15?
Mr Gray: Can I take that away
and let you have a note on that?
Q122 Chairman: You must know how
many services you offer; otherwise you would not be able to consider
Mr Gray: Indeed, but I am afraid
I do not have in my head just how many product lines we have got.
It runs into many tens, I am sure of that. I cannot remember the
basis on which those statistics are put together.
Chairman: I would like a note on that,
Q123 Ms Keeble: According to the statistics
on child trust funds, I think roughly a third of the vouchers
have not yet been deposited into accounts. Do you think that that
is an acceptable take-up rate?
Mr Gray: 75% of vouchers were
taken up within the initial 12 months, which is the period we
give to recipients of vouchers to make their own arrangements.
When we reach the 12-month point, if the vouchers have not been
deployed by the parents we take action ourselves to open an account
on their behalf, so in fact after 12 months 100% of accounts will
be in operation and the issue is what proportion we are having
to set up ourselves because parents are not doing it.
Q124 Ms Keeble: Can we go back into
those figures? You say it is 75% but if you go back and look through
the figures of accounts openedand these will be by the
parentsit is 76, 76, 73 for July to September 2005.
Mr Gray: Are you quoting from
Q125 Ms Keeble: Yes, these are your
figures, and so those ones would just be coming to an end. What
is quite worrying is that from October to December 2005 it is
64%. There might still be coming through but I would assume that
people are probably going to tend to place the funds quite quickly
or not at all. People put them behind the clock and after six
or nine months they have forgotten about them, so it will tail
off during the year. Looking at January to March and April to
June 2006, admittedly there is still some of that year to go but
the percentage is very much smaller. Obviously, there was lots
of publicity around the start-up of these accounts and I am concerned
about the decline in that initial take-up. Would you accept that
there is a problem there and, if so, what do you think needs to
be done to increase the take-up rates? I will come back to the
ones that you have placed because that is a different issue.
Mr Gray: In terms of the trajectory
of the take-up, it is a rather complex pattern that emerges. There
was certainly a large proportion of take-up initially. It then
dips down. Actually, it does pick up towards the end of the 12-month
period so it is not a progressive decline. Without talking about
our opening the accounts, which you want to come on to, what we
are seeking to do through our marketing campaigns, through the
work that we are increasingly doing with voluntary sector organisations
and others, is to identify ways in which we can better target
and incentivise people to increase those rates of take-up right
through the period.
Q126 Ms Keeble: Obviously, when these
things first came out there was lots of activity and interest
around them and now they are a year, 18 months down the line would
you accept that there might have been a little bit of complacency
creeping in and there needs to be a fresh look at really giving
a push to make sure that people open up these accounts?
Mr Gray: I certainly do not accept
that we are being complacent about this. We are looking consistently
through this period to think what are the best ways in which we
can refresh or reinforce the strategies that we have, whether
it is through marketing or whether it is through working with
voluntary sector bodies or whatever.
Q127 Ms Keeble: Of the ones that
you have opened up how many parents have come forward to claim
them? You open them up, do you not?
Mr Gray: We open them up and we
write to the parents
Q128 Ms Keeble: To come and sort
of claim them, as it were?
Mr Gray: and notify them
that the account has been opened, and I think I am right in saying
that the ones we open we allocate evenly among all the providers,
and there are 14, I think. We then write to the parents telling
them it has been opened and in most cases the institution with
whom we have opened it also will contact the parents.
Q129 Ms Keeble: How many parents
then come forward and take them up?
Mr Gray: I am sorry; I do not
understand. Take up in what sense? They have been taken up.
Q130 Ms Keeble: You can write to
the parents but it might be that the parents have moved, take
no notice, are not interested. How many parents then actually
show some response to the financial institution?
Mr Gray: I do not think we have
very good information on that yet because we will need to wait
until we can assemble the annual return information that we are
getting from the providers. I think you are trying to get at how
actively parents are managing the accounts by putting more money
in or whatever.
Q131 Ms Keeble: No, no. I was going
to come on to that. How many of the parents come forward and say,
"Yes, this account is for my kid. Here I am. I am the parent"?
If you do not know yet what plans do you have to follow up and
look at that? What I am concerned about is that the parents who
do not open it initially and the parents who then do not come
forward and claim their child's account will probably be the parents
who most need it. What I want to know is what you are doing to
identify those parents and then target them.
Mr Jones: On the first point of
your question, any initial contact between the parent and the
financial institution is, of course, then between them. We ask
the financial institution then to make an annual return to us
to tell us how many people have come forward, so we will have
data on that when we get the first set of annual returns after
next March. We are doing research at the moment into the sorts
of people who are not cashing in their vouchers themselves so
that we can understand what kind of a problem this. We are very
sensitive to the point that you raise, that those who might not
be taking up the accounts themselves might be the people who,
as you say, most need to take them up. We are doing some research
at the moment to try and establish that.
Q132 Ms Keeble: Do you have any figures
on whether it is the larger ones which are not being taken up?
It is either 250 or 500, is it not? Do you have any figures on
that breakdown or not?
Mr Jones: No, we do not, I am
Mr Gray: No, but we will aim to
Q133 Ms Keeble: Do you know how many
parents have paid into the trust funds?
Mr Gray: Again, not yet but we
will have that information from the returns. Obviously, it is
not something we can monitor week by week. We are dependent on
the returns from the providers to know that.
Q134 Ms Keeble: It is obviously very
important that the providers do that and that there is some pressure
on them to provide the information, is it not?
Mr Gray: Absolutely.
Q135 Ms Keeble: I understand that
you decided only to open accounts which track the FTSE index;
is that right?
Mr Jones: No, that is not right.
Q136 Ms Keeble: Would you like to
say what the position is then?
Mr Jones: Where we open an account
ourselves on behalf of the child it goes to one of 14 providers
on a rotational basis and it goes into that provider's stakeholder
account. Of course, it is up to the provider what type of account
to offer and some of those accounts are tracker accounts and some
of them are managed fund accounts.
Q137 Ms Keeble: Do you have any breakdown
Mr Jones: Yes, I do. Of the 14
four are trackers and 10 are managed funds.
Q138 Ms Keeble: Just looking at the
breakdown of the providers of information about what kinds of
accounts people have put the money into, 74% is stakeholders and
26% non-stakeholders, and then 20% is cash only, so presumably
the other 80% is a mixture of cash and equities.
Mr Jones: Yes.
Mr Gray: It would be, yes.
Q139 Ms Keeble: Would you care to
comment on what sorts of lessons you are learning from that because
I am quite surprised that there are so many which are a mixture?
Mr Gray: I am not sure I want
to comment in terms of making a value judgment about whether that
is right or not. The regulatory regime that the FSA has put in
place for the providers seeks to do the job of regulating, not
prescribing, but in terms of the balance of types of investment
it does, of course, have the provisionI think it from age
13 or 14 onwardsfor so-called lifestyling that as you get
towards age 18. As with other types of investment, it is appropriate
for it to have more of a cash and certain outcome, but in terms
of the initial investment I do not think it is for us to be seeking
to prescribe. I think it is for the FSA as a financial regulator
to put in place the right regulatory regime.
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