The Child Trust Fund in the UK: Policy Challenges and Potential Responses

The United Kingdom introduced the Child Trust Fund (CTF) policy, a children’s savings policy, in 2002. a focus group study conducted on parental attitudes to the CTF (Prabhakar, 2006, 2007) identified main reasons why CTF accounts were left unopened. This paper explores different ways that non-opening of accounts might be reduced. One strategy draws upon recent developments in behavioral economics and points to different ways that the CTF may be designed. an alternative strategy emphasises the role of financial education of parents as a way of addressing their concerns and increasing the opening rates of these accounts. The paper also considers another issue raised during the focus groups, namely parental unhappiness with the treatment of older siblings denied a CTF. This is part of a broader concern about the additional help that may be needed for children from particular backgrounds

Universal basic income and Covid 19

The Covid-19 crisis promises to be as big a shock to the UK economy as the 2007-08 financial crisis. The Office for Budget Responsibility recently published a scenario of the likely economic impact of the coronavirus shock to the economy. Making a number of assumptions, it suggested that real national income would fall by about a third in the second quarter of 2020. Public sector net borrowing would rise to about 14 per cent of national income, and this would be the highest annual deficit since the second world war. One idea for relieving the economic effects of the crisis is to implement a universal basic income. A basic income promises: ‘regular, non-meanstested cash transfers to all residents of a political territory on an individual basis, without means-test or work requirement’. A universal basic income has five key parts, namely, that it: is regular; is paid in cash; is provided to the individual; is universal with no means test; and is unconditional with no requirement to work or seek work. Long-standing supporters of a basic income, such as Guy Standing, call for this policy to help people cope with the economic fallout of the global pandemic. This piece considers whether Covid-19 affects two key objections to a universal basic income among the left: adequacy and opportunity cost

Attitudes Towards the Child Trust Fund: What Do Parents Think?

The Labour government has recently introduced the Child Trust Fund. This pays all new babies a £250 or £500 capital endowment from government. This is locked into a special account until the child’s 18th birthday. Parents are key to the success of this policy as they will make many of the key decisions about savings and investment. Little is known, however, about what new parents think of this policy. This paper addresses this by providing original evidence on what parents think of the basic features of this policy; whether the Child Trust Fund will make them more likely to save; attitudes towards the responsible use of the Child Trust Fund; and whether parents would prefer money spent on different forms of assistance rather than the Child Trust Fund

Sidecar Savings

Sidecar savings are a new policy idea to encourage saving for retirement. A sidecar account is an instant access savings account that is tied to a pension. A sidecar would allow account holders to access savings in the case of an emergency. There are different models of sidecar accounts and these include the two account and in plan model. A two account model is being trialled in the UK. Under a two account model, a saver makes savings into a sidecar account up to a specified savings cap. Once the savings cap is reached, extra savings are then added on top of the normal pension contributions, thereby adding to pension savings. If a person withdraws money from the sidecar, then they begin saving again in the sidecar until the savings cap is reached again. There are different arguments for sidecar savings. One set of arguments is rooted in behavioural economics and suggests that common behavioural biases means that the preferable retirement system should be one that includes savings locked in a pension and an instant access sidecar account. A different set of arguments claims that a sidecar can help certain groups overcome barriers to retirement savings caused by pressures from the cost of living. Sidecar accounts can be placed within debates about having an adequate income in retirement. Having an adequate income in retirement means that it may be important for people to save beyond the default savings rate within automatic enrolment in a workplace pension. This seems important for particular groups such as Generation X (defined as those born between 1965 and 1980) and the self-employed. Current challenges to sidecar savings include low take-up in the existing UK trial. Moving from an opt-in to an opt-out system for the sidecar may boost enrolment into the accounts. There are a range of other design issues that need exploring for any roll-out of sidecar savings, such as the size of the savings cap in a sidecar account

Financial Inclusion

Broadly speaking, financial inclusion refers to the access that people have to financial services such as banking, savings, credit and insurance. There are different definitions, though. Financial inclusion in Government policy Financial inclusion has been a consistent and increasingly important strand of Government policy since 1997. But tensions hidden within the broad concept have shaped the direction of policy. The term financial inclusion fell out of use during the Conservative-Liberal Democrat Coalition Government between 2010-2015 but policies nevertheless continued this agenda. Much of this centred on banking and saving. Since then, there has also been growing attention to how financial inclusion is combined with financial capability – that is the knowledge, skills and confidence that help people to make financial decisions. In 2017, the Government created the post of Minister for Pensions and Financial Inclusion. Since 2018, Ministers have co-chaired a Financial Inclusion Policy Forum that meets twice a year. Financial inclusion may come to the fore given cost-of-living pressures. Is financial inclusion a good thing? More widely, there are competing arguments over the merits of financial inclusion as a policy focus. Supporters argue that increasing access to mainstream financial services is important for reducing a poverty premium faced by vulnerable groups. But critics argue that it undermines the welfare state and exposes people to the risks associated with financial markets

How did the Welsh government manage to reform council tax in 2005?

Repeated calls have been made for council tax (CT) in the UK to be reformed. A ‘tyranny of the status quo’ suggests that politicians will avoid this because they fear a backlash from the losers of reform. This paper claims that the tyranny of the status quo is not a fixed law. The Welsh government revalued CT in 2005 but did not communicate the complexity of reform sufficiently. Reform requires greater efforts to communicate the complexity of winning and losing

Why do people opt-out or not opt-out of automatic enrolment? A focus group study of automatic enrolment into a workplace pension in the United Kingdom

Automatic enrolment (AE) into a workplace pension is an important recent development in pension policy. An important question for this policy is why do people opt-out or not opt-out of AE? This question is important for understanding the power of suggestion associated with AE as well as responding to concerns that women might face undue pressure to opt-out. This article addresses this question through a focus group study into the United Kingdom’s new AE policy. Women were more likely than men to cite lack of affordability as a reason for opting out. Lack of information also seemed important for the power of suggestion associated with AE. Further research should explore how to make AE less gender blind as well as the types of information or advice that should be provided alongside AE

Design and baseline characteristics of the finerenone in reducing cardiovascular mortality and morbidity in diabetic kidney disease trial

Background: Among people with diabetes, those with kidney disease have exceptionally high rates of cardiovascular (CV) morbidity and mortality and progression of their underlying kidney disease. Finerenone is a novel, nonsteroidal, selective mineralocorticoid receptor antagonist that has shown to reduce albuminuria in type 2 diabetes (T2D) patients with chronic kidney disease (CKD) while revealing only a low risk of hyperkalemia. However, the effect of finerenone on CV and renal outcomes has not yet been investigated in long-term trials. Patients and Methods: The Finerenone in Reducing CV Mortality and Morbidity in Diabetic Kidney Disease (FIGARO-DKD) trial aims to assess the efficacy and safety of finerenone compared to placebo at reducing clinically important CV and renal outcomes in T2D patients with CKD. FIGARO-DKD is a randomized, double-blind, placebo-controlled, parallel-group, event-driven trial running in 47 countries with an expected duration of approximately 6 years. FIGARO-DKD randomized 7,437 patients with an estimated glomerular filtration rate >= 25 mL/min/1.73 m(2) and albuminuria (urinary albumin-to-creatinine ratio >= 30 to <= 5,000 mg/g). The study has at least 90% power to detect a 20% reduction in the risk of the primary outcome (overall two-sided significance level alpha = 0.05), the composite of time to first occurrence of CV death, nonfatal myocardial infarction, nonfatal stroke, or hospitalization for heart failure. Conclusions: FIGARO-DKD will determine whether an optimally treated cohort of T2D patients with CKD at high risk of CV and renal events will experience cardiorenal benefits with the addition of finerenone to their treatment regimen. Trial Registration: EudraCT number: 2015-000950-39; ClinicalTrials.gov identifier: NCT02545049