Andy Golding, chief executive of Saffron explained that he felt not letting parents do so would create an uneven playing field that would allow child trust fund investments to decline and the investments in the Junior ISA, which would still be open for business to increase.

Golding explained, “By allowing parents to transfer funds accumulated in CTFs into the new junior Isas, they are far more likely to benefit from what will be a competitive market, offering good investment options with attractive interest rates. If the money is left in the CTF, it could fall victim to declining returns.

“Parents who have saved into CTFs have made a commitment to save for their children’s future and it is only fair that they are able to generate the best possible returns.”

Saffron are not the first financial services body to appeal to the government for the change. Hargreaves Lansdown, investment house Fidelity and the Daily Mail have all joined the campaign to allow parents to move their Child Trust Funds into Junior ISAs when they are released in November.

Golding added “We support Junior Isas as a tax effective way of saving for a child’s future. When these accounts switch to regular adult Isas it will also start young adults off on the road to saving.”

Director for Cheltenham-based Bank House Investment Management, Tristan Freer, explained that he also supported the campaign, adding, “CTFs should definitely be allowed to transfer automatically into the junior Isa, particularly if the tax advantages are better. However, I don’t see that happening, unless it is advantageous to the government.”

The campaign, launched by the Daily Mail, has asked the Government to look into evidence that abandoned investments suffer from neglect and subsequently poorer returns as firms are no longer looking to attract new investors and are unlikely to put their best fund managers in charge.

The Mails money section asked the government to “rescue the savings of almost six million children” pointing out that experts believe the £2billion currently sitting in child trust fund accounts believe they would achieve better returns in a Junior ISA.

The Junior ISA will be launched at the end of this year as the direct replacement for the Child Trust Fund, which is gradually being fazed out and will be abolished completely from the end of the year. The Junior ISA will allow savers to invest up to £3000 a year, higher than the £1200 allowed into a Child Trust fund at the moment, although the government plan to increase the CTFs limit in line with that of the Junior ISA.

Current rules will not allow a holder of a Child Trust Fund to open a Junior ISA, and Child Trust fund holders will be stuck with what they have.

Whilst the Junior ISA will not have a £250 government contribution like the Child Trust Fund did, the potential better performance over the lifetime of the fund, up to 18 years, could more than make up for that lack of £250 initially. Child Trust Fund holders should be worried as the Mail put it, “…unless the Government relents, that money could be trapped for a decade or more in an underperforming fund”.

There is good news today for those looking for children’s savings options, following the recent scrapping of the Child Trust Fund scheme (CTF).

The Government has today announced it will launch the Junior ISA, a tax-free savings account for children, in Autumn 2011.

Here are the important points about the planned Junior ISAs:

-  Parents can open a Junior ISA for any child under 18

-  Savings by parents and friends into the children’s ISAs become the property of the child, and are locked in until the child turns 18

 -  Savings growth in the Junior ISA is tax-free but, unlike the CTF scheme, there will be no government contributions or automatic enrolment

-  Maximum savings limits for childrens ISAs have not been announced, but may mirror the old CTF allowance of £1,200 per year

 -  The Junior ISAs will come in 2 types, reflecting ‘adult’ ISAs: the cash ISA and the stocks and shares ISA

-  The 5m existing CTFs are not affected by the new ISAs for children, and will continue until the child turns 18

Currently, adults not using their own ISA allowance of £10,200 per year are, of course, free to save for their child using an ISA in their own name. The adult ISA allowances are £10,200 per year of which half (£5,100) can be in a cash ISA, and half in a stocks and shares ISA. Alternatively, all £10,200 can be placed in a stocks and shares ISA, but not the other way around – only £5,100 is possible in the cash ISA. These are annual allowances, however – each year your slate is wiped clean, and you start again, with a fresh ISA allowance.

Adult cash ISAs can be opened once a child turns 16, and stocks and shares ISAs are available to those aged 18.

The Treasury has proposed a tax-free savings account that would provide parents with a new, tax-efficient option for saving for children.

The new account comes as the Child Trust Fund scheme, which was axed as part of the latest budget, will come to the end of its phase-out period at the end of the year.

As an investment for children, the proposed new account looks remarkably similar to the Child Trust Fund scheme, and could come onstream as early as January 2011.

While inviting consultation and input from the financial services industry for the new children’s investment account, the Treasury has suggested it include a ban on withdrawing funds until the child turns 18, children’s investments based on both cash and stocks and shares, maximum annual contributions, and tax-free returns.

Each of these elements featured in the Child Trust Fund scheme, which offered three options, a cash account, a restricted stock market investment via the stakeholder account, and a full, unlimited stock market investment through the Child Trust Fund share-based account. The maximum annual investment in the Child Trust Fund Scheme was £1,200 per child, per year.

One aspect of the Child Trust Fund scheme that is conspicuously absent from the new plan, however, is the government’s ‘start-up’ contribution of a £250 voucher to the children’s investments made for every child born after 1st September 2002. This was doubled to £500 for families on child tax credit, and a second voucher for the same amount was payable on the child’s 7th birthday.

However, very few of the children’s investments actually received the second voucher, before the Child Trust Fund scheme was scrapped in mid-2010.

Saving for children must become a key element of every family’s financial plan, following the publication of new findings by the Family and Parenting Institute (FPI).

Raising a child in the UK now costs £800 per month, much of which is accounted for by the rising cost of childcare for working parents, said the FPI. Nursery places can now cost from £30 to £80 per day - but even harder hit are the parents who cannot afford this, and must cut working hours, and lose income, to mind their children at home.

The news comes as families absorb government cuts in the June 2010 budget, which froze child benefit for the next 3 years, reduced the scope of the family tax credits scheme, and limited the Sure Start maternity grant to the first child only.

The June 2010 budget also announced the abolition of the Child Trust Fund scheme, which had proved a key incentive for children’s investments for all young families, and will now close at the end of the year.

The importance of saving for children was underlined recently by a report projecting the cost of a 3-year education at a regional (non-London) university or college in 15-18 years’ time. Based on costings from the National Union of Students, this will cost between £57k-£65k, compared with £42,000 today.

The news comes following the government’s decision to scrap the Child Trust Fund scheme, the keystone of the children’s savings business for Children’s Mutual, earlier in the year.

The Children’s Mutual has said that, on a temporary basis at least, it will accept no new children’s savings business for its With-Profits CTF, its Growing Up Bond, and its Non-Stakeholder CTF. The company’s stakeholder CTF is unaffected.

The company has said this will not affect existing customers saving for children through these products, which have been temporarily suspended while the company finalises its future strategy with regard to its children’s investments products.

Existing Child Trust Fund accounts will continue to run until all children have reached their 18th birthday, and annual children’s savings of up to £1,200 in the accounts can proceed as usual.

Under the Child Trust Fund scheme, government had been giving all children a £250 voucher to open a CTF account, with a second £250 payment due on their 7th birthday. The Child Trust Fund scheme will now be phased out, with vouchers valued at just £50 being provided to children born after 1 August this year, and no new children’s savings vouchers at all issued after 1 January 2011.

In reference to the closure of the Child Trust Fund scheme, Children’s Mutual chief executive David White said: We’re now going to have a black hole for children’s savings, we don’t know what children’s savings are going to look like.”

According to new research by The Children’s Mutual in its annual ‘What I Want to Be’ poll, becoming a teacher, doctor or vet are the job of choice for five, six and seven year-olds - and those choices have topped the poll for the last  three years, demonstrating that children consistently aspire to careers that will need higher education.

However, funding the university costs for a budding doctor or vet could require savings for kids of £116,000 and £117,000 respectively in 18 years’ time. It currently costs £74,700 to train to become a doctor and £75,100 to become a vet but these are set to increase by around £41,000, based on current projection levels, over the next 18 years.

The Children’s Mutual questioned over 1,000 parents about what their children wanted to be when they grew up, and found that the majority of today’s children are looking for a career which requires further training and education.

The reality also suggests that saving money for children is essential, even for those parents hoping their children might fund their own education. Over 93 per cent of parents of today’s young adults are still funding their children, according to The Children’s Mutual.

The top career choices for children as listed in the study were as follows.

Girls: Teacher / Vet / Doctor / Nurse / Dancer / Hairdresser / Pop Star / Artist / Actress / Ballerina.

Boys: Footballer /Policeman / Fireman / Scientist / Doctor / Teacher / Vet.

Saving for kids is as much a part of financial planning as saving for one’s own pension, and there are a good range of saving plans for children available, even though the mainstay of children’s savings, the Child Trust Fund, is being phased out.

“Parents tell us their young children are highly ambitious and that they, as parents, fully intend to help them fund their futures. But the sums of money the top careers command could cause financial nightmares for families who don’t plan ahead,” said Tony Anderson, Marketing Director of The Children’s Mutual.

“While the Coalition Government has announced its plan to significantly reduce payments into Child Trust Funds from 1 August 2010 and to abolish the scheme altogether for new babies born from 1 January 2011, the reality is that the cost of children’s futures hasn’t changed. We believe that the only way for parents to financially manage these costs is by saving regularly over the long term.”

The Child Trust Fund scheme provided a £250 or £500 child trust fund voucher to every child born after September 2002, for investment only in a Child Trust Fund. It has now become the victim of government cuts and will be phased out completely by the end of the year.

The companies managing existing Child Trust Funds have pledged to continue to so do, but there is speculation that rates of interest in the accounts, and government’s gentle tax treatment of savings in the scheme, could be adversely affected once the CTF scheme is closed. Savers may, therefore, feel less confident about continuing to use the CTF for future contributions to their children’s savings.

 For them, and for future parents who will no longer receive the child trust fund voucher, there are a number of children’s savings alternatives, moving forward.

Children’s Savings – What are the options?

There are many providers offering savings accounts specially designed for childrens savings. Tax-free interest is available on children’s savings, but not automatically – parents must fill in an R85 form for each account.

You can set up an offshore bond for your child, which makes your children’s savings tax-free while the funds are still held offshore. They can be brought back ‘onshore’ once your child turns 18, at which point tax is payable on your children’s savings. However, if this is done over time, the tax can be written off against your child’s tax-free allowance, which is the same as an adult’s i.e. currently £6,475 per year.

ISAs can be opened for a child, once they turn 16, offering tax-free savings in the cash ISA, and tax-advantaged savings in the stocks and shares ISA.

Children’s Savings – Children’s Bonus Bonds

Children’s Bonus Bonds are a secure savings option guaranteed by NS&I, which is linked to HM Treasury. You can save from £25 to £3,000 in each bond ‘issue’ and returns are free of tax. The bonds can be held until your child turns 21, at which point they must be cashed in, as they are no longer deemed to be children’s savings. You can use these bonds for children’s savings for any child – not just your own!

Children’s Savings – Child Stakeholder Pension

Did you know that it is now possible to open a pension fund for a child? The pension fund operates according to the same rules as any adult fund, and cannot be accessed until your child retires – however, your gift to your child is the constant knowledge that your children’s savings may have grown very substantially over a long time invested in the stock market, and could provide them with a considerable cushion, at the end of their working life.

Would you like to learn more about children’s savings? Make a savings enquiry online now or ring freephone 0800 678 5929.

Based on previous statements and on information gleaned from the Conservative pre-election manifesto, it had been expected that the Child Trust Fund Scheme would survive in a much-reduced form, available only to a third of the nation’s families, those with household income of less than £16,000 per year.

Payments to children under the Child Trust Fund Scheme will be phased out from August this year, and end completely on 1 January 2010.

It is not yet clear to what extent the companies managing existing Child Trust Funds will be able to continue, given this shock move by government, which is just one of a range of government cuts announced this week. The scheme had been widely regarded as the most successful initiative to encourage children’s savings in the history of the state.

Under the Child Trust Fund Scheme, all children born on or after September 1 2002 received a money voucher from the government to set up a Child Trust Fund. This was designed to give every child a nest egg, to which they would have access when they turned 18.

The original Child Trust Fund voucher was worth £250, or £500 if the parents were on a low income and qualified for the full child tax credit. At the age of seven, families received another £250 payment for children’s savings, or £500 if the family qualified for the full child tax credit. This second payment was paid directly into the Child Trust Fund account.

In justifying this apparent move against savings for children, the Government claimed that while the Child Trust Fund Scheme provided savings for children, in fact it was adding £520m to the public spending bill, which those same children would, at some stage, have to repay.

The decision to axe the Child Trust Fund Scheme is part of a round of government cuts, part of the new government’s strategy to tackle the national public deficit of £156bn.

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.