65th birthday gift idea

The Chancellor increased child benefit to [pounds]15.50 a week last month. Quick off the starting block comes Premier Asset Management with an idea that could make every child in Scotland a millionaire.

The simple brainwave that occurred to Premier's finance director, Neil Macpherson, was to induce families to save the benefit money in an account where compound interest could achieve its effects.

The state gives [pounds]806 a year. Allow that sum to fructify, and Scots children would have an endowment of [pounds]66,000 on their 18th birthday. Impressive and tasty enough, but here comes the surprise. Keep that sum accruing, and by the 65th birthday it will have multiplied to a few pennies short of [pounds]32m. No misprint, [pounds]31,974,014.22 to be precise.

Of course, it is contrary to human nature to save the DSS voucher of [pounds]15.50. For every mother, it helps her housekeeping. It is mostly dissipated in groceries; but if the modest sum can be put aside, a tool exists to banish poverty for a generation.

Macpherson acknowledges that Premier cannot expect to tie up the child allowance of poor households, but "I do think every middle-class home could put this sum aside. We do not think of children as savings vehicles, other than with the odd gift or Premium Bond. The results are so staggering, it might be argued they could pollute the life of the child. The huge sum on their life's horizon could be a hazard."

Macpherson's scheme cannot be faulted on the basis of his arithmetic. It is simple compound interest. He might be challenged on his assumed interest rates. Fourteen per cent is his working figure. The markets have beaten this for many years, but they may have shrunk 20 years hence.

"It will all have been worthwhile if we can make parents aware of the fact that a relatively tiny sum saved for 18 years can snowball into a fortune," says Jonathan Fry, Premier's chief executive.