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Contributions to Child Trust Funds grow

Contributions to Child Trust Funds grow

Category: Savings

Updated: 01/02/2011
First Published: 31/01/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Government may have scrapped the Child Trust Fund, but contributions to the accounts continue to rise.

Lump sum contributions to Child Trust Funds (CTFs) increased for the fourth consecutive quarter, according to the latest statistics from the Tax Incentivised Savings Association (TISA).

Originally introduced by the Labour Government, CTFs allowed parents to invest £250 from the Government for their child, and family and friends were encouraged to add to the total.

Despite the success of the accounts, the coalition Government has opted to scrap them as part of its effort to pay down the UK's vast budget deficit.

Parents will still be able to add money to existing CTFs, but any new arrivals will not be greeted with a £250 voucher.

Instead, the Government announced ISA accounts for children are to be introduced in autumn 2011 as a replacement for CTFs.

While limits have not yet been announced, the accounts will be tax free, funds will be locked in until the child reaches adulthood and investments will be available in cash or stocks and shares.

Tony Vine-Lott, director general of TISA, said: "Our survey shows that there is still a strong desire by parents to ensure that their children have a financial asset at 18."

"This bodes well for the new children's savings initiative and we are actively involved in the discussions to design and implement the scheme. CTFs had an objective of creating assets for young adults regardless of their background and I hope that the successor will be equally as successful."

In the three months to 15 December, the average lump sum CTF subscription grew to £525, up from £516, £511 and £507 in the previous three quarters of 2010. This increased the total amount subscribed in lump sum contributions to over £190 million.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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