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Dismay at proposal to axe child trust funds

The Tories’ pledge to scrap child trust funds for the majority of families will damage the savings culture that the party claims it wants to promote, say industry experts.

At the Tory conference, Shadow Chancellor George Osborne said offering CTF payments only to disabled children and the poorest third of families would save £300m a year.

But F&C says CTFs have a critical role in embedding a long-term savings discipline. Head of corporate affairs Jason Hollands says: “One of the lessons of the financial crisis is people need to move away from a culture of easy credit and learn to save, so CTFs have an important role to play.”

Family Investments chief executive officer John Reeve says: “The universal nature of a CTF is important. We do not think it would work if it was focused on the less-well-off as providers would not necessarily operate in that area.”

Bestinvest investment manager Hugo Shaw says: “One of the big problems is people are disillusioned and saving is a turn-off. CTFs could help burn the importance of saving into people’s minds through childhood.”

But Hargreaves Lansdown head of research Mark Dampier says the Conservatives have not gone far enough. He says: “They should scrap CTFs entirely as all Labour did was put the entire nation on benefits. How can they be funded at a time when the country is flat broke?”

AIC acting director general Ian Sayers says: “If a plan to limit tax payer funded contributions into CTFs was adopted by a future government, the AIC believes the CTF structure should remain in place so that all families have the freedom to save voluntarily for their children in a tax-efficient manner.

“This would not come with a significant tax cost for the government as children already have an income and capital gains tax allowance for savings made outside the Child Trust Fund.  However, the Child Trust Fund wrapper makes saving for children a simple and straightforward process.”

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