Government’s decision to axe Child Trust Fund is a positive step

More needs to be done to end “antiquated” children’s savings

Children’s ISA is the best option

George Ladds, Head of Investment and Pension Research at Fair Investment Company sees the demise of the child trust fund as a positive step, calls for a “fair and transparent tax efficient environment” for people to invest for children and urges the Government to consider a children’s ISA.

“Currently the only tax-exempt savings plans for children (excluding the Child Trust Fund) are plans run by friendly societies. They allow a maximum investment of just £25 a month and normally have limited fund choice, in most cases this is restricted to the with profits fund of the society.

“The charges are often unclear, and in the long term probably represent poor value for money. When you consider that most savers no longer consider with profits as a viable investment option, you have to question why this is the only tax-efficient savings vehicle for children.

“If we want to encourage savings for children, then we need to create a fair and transparent tax efficient environment for people to invest; ISAs provide that environment. It also moves us away from old-fashioned investments and into the twenty first century. For me it seems sensible to set an ISA limit for children, perhaps £3,600 to tie it in line with pensions. This means parents or grandparents then have a choice of where and how they invest the money for the long term benefit of their children or grandchildren.

“Taking this one step further, if the donor could write the ISA in trust for the child or grandchild then they could control when they receive the money. This could be at eighteen or a later age. Effectively you bring the control back to the parent or grandparent, rather than handing it to the government to decide when the money is available, and how it is invested.

“Thinking to the future, the UK has a huge deficit, so children growing up now need to be financially savvy at an early age as they are likely to be unable to rely on the state in the future, and encouraging tax-efficient savings now is a step in the right direction.

“So yes we should see the demise of the child trust fund as a positive step in the right direction, but a lot more needs to be done. We need to see the end of this antiquated system of tax-efficient savings for children and the start of a more modern and forward thinking one. George Osborne, over to you!” Click here to find out a range of the latest Children ISAs deals we have available