The tax advantages of investing in a CTF were strongly affirmed today by an IFAs' group.
Significant sums are being wasted by families whose new-borns are eligible for Child Trust Funds (CTFs), a financial firm has claimed.
According to Independent Financial Advisor (IFA) specialists Unbiased.co.uk, parents are wasting around £242 million in tax advantages each year by not paying in extra funds to their CTF accounts.
CTFs work by the government sending out a cash voucher to new parents. The idea is that the parents then invest this money for it to increase in value, with the child only gaining access to the account when he or she turns 18.
However, statistics suggest that 25 percent of children do not have CTFs opened for them by parents, while just 25 percent of the accounts which have been opened since CTFs were introduced by the government in 2005 have had any additional money put in them, despite the financial inducement of these deposits being tax-free.
David Elms, chief executive of Unbiased.co.uk, commented: "The government introduced CTFs 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."
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