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Tories’ CTF proposal draws criticism

Tories’ CTF proposal draws criticism

Category: Savings

Updated: 07/10/2009
First Published: 07/10/2009

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 It is now over 6 months old so the content may be out of date.
Politicians have been urged to retain child trust funds (CTFs) in the wake of Shadow Chancellor George Osborne's announcement that the Conservative Party would cut spending on the funds.

Should the party win next year's General Election, new spending on CTFs would be stopped for all but the poorest third of families. The Liberal Democrats have said they would scrap the scheme altogether.

Currently, all families receive a £250 voucher when their child is registered, with an additional £250 (£500 for poorer families) on the child's seventh birthday. Parents are encouraged to top up the balance, with average contributions at £24 a month at present.

The new proposal is part of a number of plans the Tories have proposed to try to claw back part of the UK's multi-billion pound deficit. However, the plans have drawn strong criticism.

"Yes, the CTF scheme can be improved but this does not mean it should be scrapped for the majority of children," said John Reeve, chief executive of Family Investments.

"Under the Conservative proposals, households earning under £17,000 and families of disabled children will be the only ones eligible for a CTF. It will not, therefore, just be the super-rich who lose this benefit; it will be millions of children from average hardworking families."

F&C Investments has warned politicians that the narrowing of the scheme may lead some lenders to stop offering such plans.

Jason Hollands, director at the firm said: "We hope that George Osborne will confirm that in moving to reduce the number taxpayer-funded CTF vouchers, and target these on the most needy, middle income parents will not be prevented from making their own voluntary contributions into CTFs."

Furthermore, the Shadow Chancellor has been advised that the scaling down of CTFs would be harmful to what the chief executive of The Children's Mutual, David White, has called 'the most successful savings product ever.'

"The CTF has trebled the savings rate for children by families," he said. "More than two million parents are using the CTFs to make monthly contributions."

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