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Child trust Funds under threat

14 May 2010 / by Lois Avery

Child Trust Funds look set to be axed for richer families under the new government’s plans.

In their coalition document the Conservaties and Liberal democrats agree that reductions in government spending can be made by reducing the ‘Child Trust Fund and tax credits for higher

The proposition, which has not been outlined in any detail yet, comes as a compromise for the new coalition. The Lib Dems originally hoped to abolish the scheme all together saying it was too costly, while the Tories suggested limiting payments to low earning families only.

Child Trust Funds were introduced under the Labour government in 2003 to act as an incentive for parents to save for their children’s futures.

Each child was given £250 at birth, held in deposit until their 18, and another £250 at the age of seven. For poorer families the figure was raised to £500 for each payment.

Plans to scrap the scheme have been criticised, saying it proved effective in encouraging parents, and young people, to adopt a healthy approach to saving.

Kate Moore, Head of Savings and Investments at Family Investments said: “Child Trust Funds (CTFs) have had a profound effect on Britain's savings habits. According to The Policy Exchange, almost one third of parents now regularly put money away on their children's behalf, up from twenty per cent before the introduction of the scheme. We estimate as much as £300 million will be added to CTFs by parents this year alone.

“Given Britain's financial circumstances, it is understandable that the new Government is looking to cut costs, but the axe should not fall on an investment in our children's future.

“The CTF scheme has helped to create a generation with a head-start in life and social mobility is likely to suffer if young people are unable to meet the costs of higher education or find the money required for a deposit on a first property.”

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