Virgin Money is calling on the government to present further proposals for Child Trust Funds announc...
Virgin Money is calling on the government to present further proposals for Child Trust Funds announced 18 months ago, otherwise known as 'baby bonds'.
Since Chancellor Gordon Brown first revealed in April 2001 his intentions to give all children a savings plan at the start of their lives, the Treasury has produced just one consultation explaining how plans might work.
Baby Bonds are expected to be mentioned in Brown's pre-Budget speech on Wednesday, however there are no details yet as to where the additional £338m to go into Child Trust funds will come from, and how it will be divided over the life of a child.
Virgin Money says it would prefer to see Child Trusts as simple and straightforward as possible, so would favour a privately-run system of tightly regulated products rather than an open market system similar to the stakeholder sector.
A flat rate, one-off £500 baby-bond payment might also be better than a series of means-tested payments over the child's 16-year life, says Virgin Money, because it would keep administration costs to a minimum.
When the Treasury first proposed the idea in April 2001, the intention was to offer every baby a trust fund containing £250 and up to £500 for the poorest families, in a bid to combat child poverty as well as further investments of between £400 and 800 when the child reaches 5, 11, and 16, depending on the family's financial status.
In addition, there is no detail as yet on how the government intends to persuade parents to add money each month.
Gordon Maw, director at Virgin Money, says an amount which is the equivalent of child Benefit each month and invested in the same Trust would offer the child a sum of £27,300 by the time they reach 18 - perhaps the sum of money they need to finance their education if government higher education reforms go ahead.
"Clearly, this new scheme will be a major step forward in the government's fight against child poverty and its campaign to broaden asset ownership. However, the scheme must be simple and engaging and it must encourage parents to want to contribute too."
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