George Ladds, head of investments and pensions research at Fair Investment Company comments on the news that the new coalition government plans to scrap Child Trust Funds to save £320million in 2010/11, rising to £520million in 2011/12.
"As a middle earner and father of two children, one (born in 2000) who is not eligible for the Child Trust Fund, and the other (born in 2003) who is, I have always found them to be an odd concept.
"Firstly, the assumption that as parents we are incapable of saving for our children without funding from the state is slightly insulting. Those who can afford to save, will and shouldn't be getting handouts to do so. While those who can't afford to save have much bigger things to worry about, like paying bills, than which Child Trust Fund to save their child's voucher into – this is money they could do with now, not in 18 years time.
"And secondly, despite the fact that my wife and I treat our children exactly the same, they have been treated completely differently by the state, without any consent from us as parents. While my eldest will have nothing from the government when she reaches 18, my youngest will have at least the £500 invested by the government, and if performance has been good perhaps a little extra. It’s ironic that not only does my eldest daughter miss out on this handout, but when she starts her working life she is going to be paying back the debt that she has not benefited from.
"Unfortunately, there is nothing we can do to even it up – we can't split the money between our two daughters because the money belongs to our youngest, and only she can decide what she does with it when she reaches 18, and giving half to her sister seems unlikely.
"However, although I am not in support of the government giving children money with which to save, I hope that in the scrapping of the Child Trust Fund, the £520million saving is well spent and that children's saving is not completely forgotten; there should be some review of savings vehicles available for children, because the current offering is antiquated and doesn’t reflect the modern world.
"Personally, I would like to see some sort of children's ISA. Children and their parents would be encouraged to save if they could get the same tax efficient saving benefits that we are all entitled to. If the government set an ISA allowance of £3,600 for children this might encourage more to save in a way that they want to invest and enable parents to take more control over who they save for and when they receive the money.
The views expressed are George Ladds own