Save child trust funds says new lobby group

A newly launched association of parenting and financial organisations is lobbying the government to keep the child trust fund (CTF) tax wrapper.

The Save Child Savings Alliance (SCSA) has called CTFs the most successful savings scheme to have ever come from government.

Introduced in 2005, CTFs give children a £250 voucher paid to a special account on top of which a further £1,200 can be saved each year until the child’s 18th birthday. There is no income or capital gains tax payable on CTF accounts.

The government will save £320 million from reducing and then stopping government contributions to CTFs as part of its spending cuts. It will first scale back payments from August this year and then stop payments from January next year.

In an open letter the SCSA called on the government to:

• Protect the CTF tax wrapper, if not the £250 voucher, to ensure the long term security of families’ financial planning and enable them to treat each of their children equally;
• Ensure CTF savings are not capped below £3,600 per child per annum to meet the anticipated costs of early adulthood;
• Prioritise CTFs for renewed government development and investment as soon as the economic recovery allows.

The association is made up of a number of organisations interested in the area of childhood savings such as The Children’ Mutual, the Institute of Public Policy Research, Association of Financial Mutuals (AFM) and Family Investments.

The members wrote: ‘For a government that claims to want to promote savings, the decision to abolish the CTF along with the Savings Gateway is short-term and misguided.

'The CTF is the most successful government savings scheme ever. It has made great strides towards increasing the asset base in Britain, helping families to save for the costs they will face as their children make the transition into young adulthood. At present, nothing has been proposed to be put in its place.’

Martin Shaw, chief executive of the AFM, which provides over half of all CTFs, said: ‘The Alliance accepts there is no money to fund vouchers for new parents at present, but we believe very strongly that keeping the CTF open to new parents is a proven way of encouraging saving and will require very little government support.’