Reform urged to child trust funds

In its Coalition Agreement, the Government said it planned to "reduce spending on Child Trust Funds", prompting speculation that they will be scrapped for families who are not on low incomes.

But think tank the Social Market Foundation (SMF) said limiting the funds to the less well-off may make them less viable as annual management charges would be loaded on to those who saved the least.

Instead, it said, there were other measures that could cut the scheme's costs dramatically while other changes could offer greater saving incentives to people on low incomes.

All children born on or after September 1 2002 currently receive a 250 child trust fund voucher to be invested on their behalf, with children from less well-off families receiving 500.

The Government makes a further contribution when children are seven while family and others can pay in as much as 1,200 a year.

The SMF said that abolishing the universal payment for seven-year-olds would save just 218.5m a year.

It also suggested reducing the value of the universal birth voucher from 250 to 50.