Well its official – the government is replacing the Child Trust Funds program with a tax free savings account. It will be similar in regulation to the CTF but will be absent of the government contributions.
The government plans to work closely with shareholders to determine the details of the accounts. The new accounts should be available by the fall of next year.
Funds will be deposited into an account, and then be off-limits until the child becomes an adult. Mirroring traditional Isas, annual contributions to the account will be limited.
A history of the accounts reveal that parents received a voucher for newborns in the amount of 250 pounds. They were given access to this after age 18. An additional deposit was made at the age of seven. Then in May of this year, the government announced CTF’s would be phased out in order to save about 500 million pounds per year.
Mark Hoban, Treasury Secretary, commented on the blueprint of the new accounts, saying: “I am committed to ensuring that all parents can save for their children’s future in a simple and straightforward account. The introduction of this new account means that we can still offer people a clear way of saving for their children, while saving the half billion pounds a year that we currently spend on Child Trust Funds”.
Carol Knight, head of TISA member services, discussed the importance of the newly devised account, saying: “We fully support this announcement. Following the decision that children born after the end of this year will not qualify for a Child Trust Fund there has been a real need for a scheme that is attractive to the consumer, is simple, provides choice, flexibility and variety and that is built on a brand they can trust.
“There is an increasing awareness of the need to take personal responsibility for the future whether it be retirement, higher education or housing. Many parents even now are making financial sacrifices to help children through university or onto the housing ladder so this new savings scheme will play an essential role by providing a vehicle which the public feels comfortable with and will help families make provision for the future.”