Children short-changed in Government scheme

In the three years and a half years since the Government launched its Child Trust Fund (CTF) scheme offering £250 to any child born after 1 September 2002, 3.61 million children have benefited, however future generations could see their nest egg put at risk by rising inflation.

In April 2005, at the launch of the scheme, children born after 1 September 2002 had their £250 vouchers topped up to allow for lost growth but since, newborns have received a flat £250. With inflation now running at a significantly higher level than 2005, retail stockbroker and CTF account provider The Share Centre is calling on the Government to apply index-linking to prevent today's newborns losing out.

Guy Knight, group sales & marketing director, The Share Centre said: 'While it is great that children are given this financial start in life, it is not fair that children born today will get £145 less after inflation than their predecessors in the course of the scheme. We calculate 2 babies born today should receive £288 to give them the same start in life as babies born on 1 September 2002.

"If you forecast the difference over the child's 18 years, the Government could be looking at a shortfall of over £97 million a year for newborn babies. If the point of CTFs is to give children a good financial start in life, it seems short-sighted of the Government to hinder the investment potential of future generations. We would urge the Government to reconsider the limits and keep them in line with inflation so that every child has a fair and equal starting point for their investments."

20 August 2008 © Moneyextra.com

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