John Reeve, Chief Executive of Family Investments, said: “We fully support the Conservative Party’s desire to restore a savings culture in the UK - we just believe that by cutting the CTF they will be removing one of the tools most likely to help achieve this.
Child Trust Funds were designed to provide all children with a financial asset when they turned 18 and give them a real head start in life. The initial government contribution was designed to ensure that all children benefited and also encourage parents to save for their children’s future.
John Reeve says: “The CTF is clearly creating a culture where parents save more for their children. Nearly a third of all CTF accounts receive regular top-ups, with an estimated two million parents and relations adding £22 million a month to CTFs.
“Recent research by Family Investments shows that 96% of parents with a CTF think they are a good thing and are an effective encouragement to save for children. The CTF has encouraged those who can save but have not previously done so to start saving. Without the nudge to action created by the CTF there is a danger these positive trends will be reversed. There is also a danger that those who still receive CTFs will be less inclined to make additional savings if any new Conservative government is not committed to ensuring they engage with the scheme.
“Recent research by Family Investments shows that 96% of parents with a CTF think they are a good thing and are an effective encouragement to save for children.”
“The most worrying aspect of the Conservative Party’s plans is the lack of clarity over which families it will affect. Whilst saying they are only planning to cut government contributed CTFs for the better-off, the plans they have announced so far will mean any family earning more than £16,040 a year will not receive one. This means that it will be hard-working, low to middle income families who will be really hit by the cuts. These are exactly the kind of families who may want to save for their children’s future but need the help and encouragement to do so.
“It seems strange that one of the few definite spending cuts George Osborne has announced is one that will have such a negative impact on their stated policy aims. We call on George Osborne to clarify how he will help hard-working, low to middle income families, save for their children’s future, if he cuts their CTF.”
About Child Trust Funds
- The Child Trust Fund is a savings and investment account for children born on or after 1 September 2002
- Eligible children receive a £250 voucher to start their account. When the child is 7 years old, the CTF receives an extra £250 from the Government. Children in families with lower incomes automatically get an additional payment of £250 from the Government at birth and age 7
- The CTF is tax free
- A maximum of £1200 can be saved in the account per year
- Money cannot be withdrawn from the CTF until the child is 18 years old
- The first CTF account will therefore mature in 2020 when those children born in 2002 turn 18