Child trust funds threatened

Shadow Chancellor George Osborne’s caused a stir at the Conservative Party Conference when he revealed that the Conservatives intend to withdraw child trust fund payments from all but the poorest third of families if they come into power at the next general election.

Child trust funds offer a way for parents to save for their children. Money can be added to the account each year, but cannot be withdrawn. When the child reaches 18, they are given access to the funds. Since 2005, the Government has provided a voucher worth £250 (£500 for the lowest income families) to every newborn child to encourage parents to start saving.

The scheme also pays out a further £250 when a child reaches their seventh birthday, but only if they were born on or after 1 September 2002 – meaning your child could be about to receive a windfall.

David White, Chief Executive of leading child trust fund provider, The Children’s Mutual, said:

“We’re surprised and disappointed by Mr Osborne’s statement today. If it is the intention to create a savings culture in this country we must preserve the Child Trust Fund for all families.”

“Research suggests that this is the one thing that is really getting savings moving again. In this period of record indebtedness the Child Trust Fund has become the savings vehicle of choice for families looking to provide a better future for their children. Quite clearly this would reverse that trend. We are reporting record opening of savings accounts and overall increases in saving. We believe the evidence shows that this is the most successful savings product ever.”

“The Child Trust Fund has trebled the savings rate for children by families. More than two million parents are using the CTF to make monthly contributions. Amongst our customers those contributions have risen by 60% from £15 to £24.”

“Many of today’s young adults are drowning in a sea of debt and are further away than ever before from being able to afford education, to get on the property ladder or advance themselves.”

“We predict that if, on average, £0.5 billion is being invested each year in Child Trust Funds this would result in an anticipated £2.4 billion being available to young adults which would make a huge difference to the Nation’s level of indebtedness.”

“We need to pull future generations from the sea of debt. Removing the most successful savings initiative ever at this juncture will condemn the young people of the future to the same fate as today’s generation.”