Goodbye child trust funds, Mr Osborne?
Wednesday, 07 October 2009 07:06
Yesterday George Osborne announced he would be giving child trust funds the boot.
In a speech to the Tory Party Conference, the shadow chancellor said he would ditch the funds if the Conservatives came into power as he looks to make cuts.
He said: "Quite frankly child trust funds have not been as successful as many like myself hoped.
"We should continue paying them to the poorest families who often have no savings, and encourage them to use them more.
"But, let me tell you today, handing out new baby bonds to the rest of the country is a luxury we can no longer afford."
However, at the same time he said: "We will support the culture of saving."
The move is thought to save the taxpayer £300 million a year.
David White, chief executive of the Children's Mutual, said; "We are surprised and disappointed.
"George Osborne is sending out the message about a savings culture but at the same time looking to end the most successful savings product ever."
He added child trust funds have seen family savings rates for children up three times.
The policy seems to be that those with child trust funds in place - which are set to mature when a child hits 18 providing them with a boost to start life or cover education costs - will keep their accounts, presumably with their tax benefits.
However, new accounts would stop, and presumably also the top-ups of £250 or £500 for low income families at the age of seven.
Jason Hollands, director of F&C Investments, called for child trust funds not to be abandoned completely but streamlined to maintain voluntary contributions from family friends and business.
"At F&C we have consistently argued there has been too much focus on the taxpayer funded handouts when the real focus needs to be on encouraging people to change their own savings habits," he said
"We would urge any incoming government that is considering cutting back on the costs of CTFs, either by closing the scheme or limiting taxpayer vouchers to those on lowest incomes, not to prevent parents and grandparents who are willing to save their own money from doing so."
However, Mr White questioned whether providers would be able to maintain funds given the price cap if the government contribution is taken away.
He added those in the industry would be pushing all parties to see a reversal of the policy.
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