The Capital Market Development Council (CMDC) is exploring the possibility of creating a Child Trust Fund (CTF) that would provide long-term savings or investment accounts to qualified low-income families to support their children’s tertiary education.

ROSALIA DE LEON - Gov’t mulls educational fund for Filipino children
National Treasurer Rosalia De Leon

Under the plan, National Treasurer Rosalia De Leon said that both the national government and the local government units (LGUs) will contribute to the proposed CTF, which will be professionally managed by financial institutions.

De Leon presented an overview of the CTF plan with Finance Secretary Carlos Dominguez III,  lawyer Benedicta Du-Baladad of the Financial Executives Institute of the Philippines (FINEX) and Securities and Exchange Commission (SEC) chairperson Emilio Aquino.

The concept was adopted from the CTF implemented in the United Kingdom (UK) and Singapore’s Education Endowment or Edusave Scheme, De Leon said.

“The fund can also either be managed by the government and a part of it can also be cut out to be managed by the private sector,” said De Leon, who also acts as treasurer of the CMDC. 

“We are still on an exploratory stage and we would like to further do a more detailed or granular study on the CTF and to sell it to the Council in the coming meetings,” she added.

De Leon said that in the UK, more than six million CTF tax-free accounts were set up to prepare for future educational expenses or for any other purpose that would benefit children born between September 1, 2002 and January 2, 2011.

The government provided an initial seed money of 250 or 500 British pounds per child, with the latter amount for children in poor households.

The funds can be drawn in the UK once the children reach 18 years of age. 

In Singapore, the government contributes a total of 4,000 Singapore dollars over 10 schooling years of primary and secondary education of each child-beneficiary under its Edusave Scheme, which automatically covers all seven-year old Singaporeans.

With no withdrawal restrictions, the beneficiaries can take out money from their accounts even before their maturity, provided that they use the proceeds for educational purposes.

The government closes each account and transfers the unused fund balance once the child-beneficiary reaches 16 years of age. 

De Leon said in the Philippines, where education is free from kindergarten to college in all public schools and state tertiary institutions, the proceeds from the CTF can be used to augment funding support for students who would still need daily allowances, transportation expenses, board and lodging and other miscellaneous expenses.

Based on a Philippine Statistics Authority survey in 2017, around 18 percent of out-of-school youths have cited financial woes as their main hindrance to getting an education, despite a conditional cash transfer program being implemented by the government.

De Leon said the country’s planned first-ever CTF provides a solution to one of the hindrances to the country’s commitments to the United Nations’ Sustainable Development Goals (SDGs), of which the fourth one is Quality Education. 

CTFs and other similar investment accounts benefiting children are already in place in other Asian economies such as South Korea, Hong Kong, and Taiwan, De Leon said.

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