The Child Trust Fund, which was introduced in 2005, is seen by many as the most successful savings products ever, having been responsible for a 300% increase in the rate of saving for children in four years. Not so in the eyes of Shadow Chancellor George Osborne however, who told the Conservative Party Conference that Child Trust Funds had not been as successful as he had hoped and said that he would abolish them - at least for all but the poorest families - if and when the Conservatives came to power.
Paradoxically, Mr. Osborne voiced his support for "a culture of saving", yet said that all new spending on Child Trust Funds would cease for families earning over £17,000 per annum. This would mean that children of these families would no longer receive an initial contribution of £250, or £500 for low income families, from the Treasury, or the same amount when they reach seven years of age. Indeed, it is debatable whether Child Trust Funds would be available even for voluntary contributions from parents, other relatives and friends if Mr. Osborne has his way. Existing Child Trust Funds are expected to be allowed to continue to maturity when a child reaches the age of eighteen, with their tax-free benefits intact.
Dissenting voices within the savings and investment industry argue however, that Mr. Osborne is placing too much emphasis on Treasury contributions and in doing so is overlooking the importance of changing savings habits. The abolition of the Child Trust Fund scheme would deny parents and grandparents the opportunity to save effectively for their children's future and even if Mr. Osborne allowed the scheme to continue, minus Treasury contributions, its viability would be threatened, according to leading industry figures. Even the argument that Mr. Osborne's proposal could save a future administration up to £300 million a year fails to hold water with many in the industry, particularly with public sector borrowing currently at nearly £825 billion.
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