Parties urged to safeguard child trust funds

Wednesday, 28 April 2010 09:47

BY myfinances.co.uk staff

The main political parties should avoid "short sighted" cuts to child trust funds (CTFs) that would remove an important incentive for saving, an expert has warned.

Moneynet.co.uk's Andrew Hagger said that while bringing the public sector deficit under control, whoever is in power following the general election on May 6th should not underestimate the importance of the accounts in building up a financial cushion for young people.

Research by the Tax Incentivised Savings Association recently showed that over 640,000 CTFs currently receive monthly contributions totalling £14.4 million from parents, relatives and family friends.

The typical payment of £22.50 a month, together with the two government top-ups of £250, going into an account with four per cent annual growth would yield £7,964.70 when the account holder turns 18, he said.

Under Labour's manifesto, CTFs would remain available to all. The Conservatives have pledged to restrict the accounts to the poorest third of households, while the Liberal Democrats would remove public funding for the scheme.

A MumsViews poll for Family Investments recently showed that 80 per cent of parents would oppose changes that restricted access to CTFs.

Children born on or after September 1st 2002 are currently eligible for one of the accounts.

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