Parents unaware of potential threat to Child Trust Funds and don’t want to see them scrapped, survey shows

News - Funds

Written by Ray Clancy

Friday, 19 February 2010 09:25

The majority of parents do not want to see Child Trust Funds cut, according to a new survey and most are unaware of this potential threat to children’s savings.

The research, prompted by an announcement by the Conservative Party that it plans to cut the Child Trust Fund if it wins the forthcoming election, found that 8 in 10 parents do not support the idea.

Some 96% think that the CTF scheme is a good one as it encourages them to save for their children’s financial future and 72% were unaware of the announcement, the research from Family Investments found.

Nearly a third of all CTF accounts receive regular top-ups, with an estimated two million parents and relations adding £22 million a month to CTFs, the company said.

It points out that one of the Conservative Party’s key policy aims is to create a savings culture in the UK, yet they have outlined plans to cut the CTF for the majority of families. ‘Currently this means that any family with a total household income of more than £16,040 will not get one. Almost three quarters of parents in our research were unaware of this potential threat to the universal CTF scheme and the same proportion said they would look upon a political party that introduced this change less favourably,’ said John Reeve, chief executive of Family Investments.

He said that if the Conservatives’ current proposals go ahead, 560,000 newborn children a year will no longer be eligible for CTFs, which they claim will save them £300 million a year. The Institute for Fiscal Studies, however, has put this figure closer to £225 million.

‘The CTF has a lot of support from parents who do not want to see the scheme changed. More than 80% still believe that all newborn children should remain eligible for the CTF, rather than restricting the vehicle to parents with a household income of £16,040 or less. If the Conservative’s plans were implemented it would mean that children whose parents were on minimum wage would not qualify for the CTF,’ explained Reeves.

‘It is hard working, low and middle income families who will be really hit by these spending cuts. These are exactly the kind of families who may want to save for their children’s future but need the help and encouragement to do so. To get rid of the CTF before the long term benefits have been realised seems very strange,’ he added.