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Parents may resent scrappage of Child Trust Funds...but they were set to waste £18m by not using CTF tax breaks this year

·   As Labour's flagship childrens' savings scheme is due to be scrapped by  January 2011 -  £18 million was set to be wasted this year by parents not taking advantage of the full tax breaks of their children’s Child Trust Fund (CTF)

·   Only a quarter (24%) of the CTF accounts opened since 2005 have recorded additional deposits

·   A massive 99% of CTF accounts opened have not received maximum funding

·   Only 71% of eligible children have had a Child Trust Fund opened for them

Parents, left-leaning think-tanks and academics, and City fund management groups are fighting to save Child Trust Funds – an early victim of the coalition government's spending cuts.  However, research* from unbiased.co.uk, the professional advice website, shows that parents were set to waste £18 million this year in tax breaks by failing to take advantage of their children’s CTF allowance.

Unbiased.co.uk research reveals only just over two thirds (71%)** of eligible children have had a CTF account opened for them, and only a quarter (24%) of those opened since 2005 have recorded additional deposits. In addition, a meager 1% received maximum funding. Even if just half of the accounts which had no additional funding had been topped up to the maximum amount, the overall additional tax saving would equate to £18 million.

Karen Barrett, Chief Executive of unbiased.co.uk comments: “Whilst there has been a backlash reported following the new Government’s announcements to scale back payments into Child Trust Funds this year and axe them completely from the start of next year, our research shows that parents have not been fully taking advantage of them since they were originally introduced. Currently, parents don’t have to pay tax on the interest earned on a CTF account and by not using their full funding allowance each year they may potentially be gifting the taxman more money than necessary.

“Although the plans are now being scrapped, it is understood that existing CTFs will continue to run until the child's 18th birthday, when the plans mature. The government intends to introduce secondary legislation cutting the money children receive at birth from £250 to £50 from August 1 this year, with children from lower income households receiving £100, down from £500 previously.

“Parents who are keen to make financial provisions for their children’s future should take tax action now and can carry out a free and confidential search at unbiased.co.uk to find an independent financial adviser who can offer invaluable advice on the best way to safeguard their children’s future.”

 ENDS

*TaxAction 2010 report produced for IFA Promotion by RAKM, based on a specially commissioned analysis of Inland Revenue and a range of other official data sources

** 5.1 million vouchers have been issued / 3.6 million accounts have been opened * 100 = 71%

Karen Barrett, Chief Executive, unbiased.co.uk: 020 7833 3131

Anna Schirmer/Anna Moulds/Charli Scouller, Lansons Communications: 020 7294 3682

For expert commentary or case studies from over 150 media-friendly IFAs, journalists should visit www.unbiased.co.uk/bluebook.

About unbiased.co.uk, the professional advice website

The unbiased.co.uk portal is a free and confidential UK-wide search matching consumers with local professional advisers: ‘find an IFA’, ‘find a mortgage adviser’, and ‘find a solicitor’, and is currently inviting registrations for its ‘find an accountant’ service.  These searches enable consumers to find professional advisers by postcode, area of specialism, qualification and payment method. In 2009, unbiased.co.uk fulfilled half a million searches for local, professional advice. 

IFA Promotion, the organisation behind unbiased.co.uk, is now in its 21st year, and was set up to promote the benefits of independent financial advice to consumers.  IFAP is sponsored by the following companies:

Registered Office: unbiased.co.uk is the consumer brand of IFA Promotion Ltd, 90 St. Vincent Street, Glasgow G2 5UB. Registered in Scotland: No. 114606