The Treasury has announced the creation of a new tax-free savings account for children, which will be owned by the children themselves but who will not be able to access it till they are 18. Financial Secretary Mark Hoban said
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.
In August, the Government stopped all CTF payments at 7 and cut payments at birth from £250 to £50 for most children and from £500 to £100 for those from poor families. From January, CTF payments will cease altogether. The new measure essentially re-introduces the CTF – but only for those who can afford it.
The financial press is over the moon and is already calling for CTFs to be merged into the new vehicles. An unkind observer might suggest that they are keen to escape the 1.5 per cent maximum management fee set by CTF rules.