With the demise of the Labour government, the writing may be on the wall for the future of the Child Trust Fund (CTF) scheme.
Labour had been the only one of the three main parties to pledge continued support for children’s savings in the Child Trust Fund. However, both parties in the new Government, the Conservatives and the Lib Dems, have stated it would be their intention not to continue with the scheme, at least not in its present form.
So far the Child Trust Fund scheme has been a success as an initiative to encourage savings for children, and not just among the better-off. Data from fund provider Children’s Mutual show that 30% of households with income of £19,000 or under save £19 a month (in addition to the government voucher) in children’s savings.
Nonetheless, the Conservatives believe the Child Trust Fund should be offered only to the poorest third of UK families, while the Lib Dems would like to see the scheme scrapped altogether.
The Child Trust Fund Scheme was launched in 2002, to encourage all sectors of society towards children’s savings, an option they might otherwise have neglected.
Under the Child Trust Fund Scheme, all children born on or after September 1 2002 receive a money voucher from the government that can be used only to set up a Child Trust Fund, and to which the child can only gain access when they turn 18.
The Child Trust Fund voucher is worth £250, or £500 if the parents are on a low income and qualify for the full child tax credit. At the age of seven, families receive another £250 payment for children’s savings, or £500 if the family qualifies for the full child tax credit. This second payment goes directly into the Child Trust Fund account.
Relatives and friends can also make savings for childen using the Child Trust Fund by paying extra money into the Child Trust Fund, to a maximum of £1,200 a year.
Parents must choose a Child Trust Fund, and invest their child’s money within 12 months of receiving the voucher. If they do not, then the Government opens a Child Trust Fund on their behalf.
Launched in 2002, the Child Trust Fund Scheme had its 7th birthday in 2009, when the first wave of 7-year-olds received their 2nd voucher for children’s savings in their Child Trust Fund.
