Child trust funds not keeping up with inflation

Child trust fund vouchers should keep pace with inflation, the government is being urged.

For the last 3.5 years the government has offered vouchers worth £250 for child trust funds to new borns, but the Share Centre is highlighting the fact these are not rising with inflation.

The failure to link child trust fund vouchers to inflation means the size of any future nest eggs are being gnawed away.

It is estimated babies born today should receive £288 to give them the same start in life as babies born on September 1st 2002.

Guy Knight, group sales director at The Share Centre said: "It is not fair that children born today will get £145 less after inflation than their predecessors in the course of the scheme."

“If you forecast the difference over the child’s 18 years, the government could be looking at a shortfall of over £97 million a year for newborn babies."

He added: "If the point of child trust funds is to give children a good financial start in life, it seems short-sighted of the government to hinder the investment potential of future generations.

"We would urge the government to reconsider the limits and keep them in line with inflation so that every child has a fair and equal starting point for their investments."

Some 3.61 million children have benefited from child trust funds since they were made open to children born after September 1st 2002.

A maximum of £1,200 each year can be saved in the account by parents, family or friends once it has been open, with several providers to choose from.

On the child's seventh birthday a further £250 is deposited by the government in the fund and an extra £250 for those from low-income households.

Parents also have the option of investing fund in ethical accounts, shari'a accounts, in shares or in stakeholder accounts.

Supporters of index-linked child trust fund vouchers are encouraged to join The Share Centre’s petition at www.share.com/fairdeal