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‘Two million children will lose out under CTF’

Chancellor Gordon Brown is being called on to prevent an estimated two million children losing part of their child trust fund allowances because of their birthdays.

Broker Reyker Securities says children born on or between September 1, 2002 and April 5, 2005 qualify for inclusion in the child trust fund but will be disadvantaged by losing the 1,200 allowances for the first one or two years of their lives.

This is because their child trust funds cannot be opened before April 6, 2005 and payments cannot be carried back.

Some children will also have a restricted time in which to invest the first year’s allowance. Child trust funds run from the eve of a child’s birthday, so children born in, say, September only have six months to fund their 2004/05 allowance.

Those born on April 6 lose their 2004/05 allowance because the eve of their birthday falls before a fund can be opened while those born on April 7 just one day to use their allowance.

Reyker Securities director John Moorhouse says the Inland Revenue is aware of the anomaly but has not acted to rectify it.

He suggests that increasing the annual allowance to 1,400 from April 6, 2007, subject to an overall 21,600 cap – the equivalent of 18 years investment at the current 1,200 annual allowance – would help spread payments and enable disadvantaged children to catch up.

Moorhouse says: “We think we have come up with a solution to this problem that will cost the Revenue very little and even give the Chancellor a spin opportunity.”

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