Parents urged to make use of Child Trust Fund allowance

Parents are wasting £63 million in tax breaks by not making full use of their children's Child Trust Fund (CTF) allowance this year, according to research from Unbiased.co.uk.

Unbiased.co.uk research reveals that only a quarter (24%) of the CTF accounts opened since 2005 have recorded additional deposits, and only 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 additional tax saving would equate to an overall amount of £63 million.

Additionally the research discovered that only three quarters (72%) of eligible children have had a CTF account opened for them.  Since the introduction of Child Trust Funds approximately 4.3 million vouchers have been issued to eligible children, however, in the same period only 3.1 million accounts have been opened.

A CTF is a long term savings and investment account where the child can only withdraw money when they turn 18, although the child can start making decisions about how the money is managed when they turn 16.  Parents should ensure they invest the £250 voucher as soon as possible to ensure they receive the maximum tax saving gains on the account.  A maximum of £1200 each year can be saved in the account by parents, family or friends.

Karen Barrett, Chief Executive of Unbiased.co.uk comments, "The government introduced Child Trust Funds as a way of helping parents plan for their children's futures. However, our research has shown that parents are not making the most of this opportunity. 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."

"The new year is a great time to review both your own and your children's finances.  Parents should take 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."