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Child trust fund
A child trust fund (CTF) is a long-term savings or investment account for children in the United Kingdom. New accounts can no longer be created as of 2011, but existing accounts can receive new money: the accounts were replaced by Junior ISAs.
The UK Government introduced the Child Trust Fund with the aim of ensuring that every child has savings by their eighteenth birthday, helping children get into the habit of saving; whilst teaching them the benefits of saving and helping them understand personal finance. The Child Trust Fund scheme was promised in the Labour Party's 2001 general election manifesto and launched in January 2005, with children born on or after 1 September 2002 eligible.
Eligible children received an initial subscription from the government in the form of a voucher for at least £250. In 2010/11, the Child Trust Fund policy was expected to cost around £520m, less than 0.5% of the £84bn UK education budget. Because the scheme allows for family and friends to top up trust funds, it has given a substantial boost to savings rates, particularly among the poor. According to the Children's Mutual, "In terms of changing people's behaviour, this is the most successful product there's ever been." For households with income of £19,000 a year, 30% of the children in that category are having £19 a month saved for them. Part of this is due to grandparents being more willing to contribute to funds, since the money cannot be diverted to the family finances. Creation of new funds and government payments into them were scrapped in January 2011 by the Savings Accounts and Health in Pregnancy Grant Act 2010.
Asset-based egalitarianism traces its roots to Thomas Paine, who proposed that every 21-year-old man and woman receive £15, financed from inheritance tax. In 1989, LSE professor Julian Le Grand proposed a similar idea, calling it a "poll grant". Subsequently the related concept of Individual Development Accounts was developed in the United States by Michael Sherraden. This approach - termed "asset-based welfare" by Sherraden - saw asset redistribution less as an egalitarian measure than as one which supported poverty reduction by encouraging saving. Sherraden argued that owning an asset led to people changing their way of thinking, being more likely to plan and invest in their future - in a way that providing people with an equivalent flow of income does not. The idea of a universal account for all children first appears in Sherraden's Assets and the Poor (1991).
In the UK, the idea took off in 1999/00 with a number of contributions to the New Statesman in 1999, including an article from Robert Reich endorsing the idea; and support in 2000 by the influential Institute for Public Policy Research. Sherraden's Center for Social Development collaborated with the IPPR, and a briefing paper by it remarked "It would be impossible to overstate the leadership and contributions of the Institute for Public Policy research in informing and shaping this new policy direction in the United Kingdom". This carried through into proposals being included in the Labour Party's 2001 general election manifesto.
The Child Trust Fund scheme was promised in the Labour Party's 2001 general election manifesto, and launched in January 2005, with children born on or after 1 September 2002 eligible. Over the course of the development of the policy up to implementation, it became increasingly focussed on encouraging the poor to save and to develop their financial skills, with less emphasis on the egalitarian redistribution of assets.
According to the Institute of Public Policy Research
The wealthy have always relied on assets to smooth the path into adulthood, but now every single child will be able to do the same. The lumpy costs, the risky decision, and upfront investment involved in making ones way in life will be eased, whether that means spending money on training, starting a businesses - or simply buying the suit needed to attend an interview... CTFs recognise that assets, not just income, can bring security and opportunities.
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Child trust fund
A child trust fund (CTF) is a long-term savings or investment account for children in the United Kingdom. New accounts can no longer be created as of 2011, but existing accounts can receive new money: the accounts were replaced by Junior ISAs.
The UK Government introduced the Child Trust Fund with the aim of ensuring that every child has savings by their eighteenth birthday, helping children get into the habit of saving; whilst teaching them the benefits of saving and helping them understand personal finance. The Child Trust Fund scheme was promised in the Labour Party's 2001 general election manifesto and launched in January 2005, with children born on or after 1 September 2002 eligible.
Eligible children received an initial subscription from the government in the form of a voucher for at least £250. In 2010/11, the Child Trust Fund policy was expected to cost around £520m, less than 0.5% of the £84bn UK education budget. Because the scheme allows for family and friends to top up trust funds, it has given a substantial boost to savings rates, particularly among the poor. According to the Children's Mutual, "In terms of changing people's behaviour, this is the most successful product there's ever been." For households with income of £19,000 a year, 30% of the children in that category are having £19 a month saved for them. Part of this is due to grandparents being more willing to contribute to funds, since the money cannot be diverted to the family finances. Creation of new funds and government payments into them were scrapped in January 2011 by the Savings Accounts and Health in Pregnancy Grant Act 2010.
Asset-based egalitarianism traces its roots to Thomas Paine, who proposed that every 21-year-old man and woman receive £15, financed from inheritance tax. In 1989, LSE professor Julian Le Grand proposed a similar idea, calling it a "poll grant". Subsequently the related concept of Individual Development Accounts was developed in the United States by Michael Sherraden. This approach - termed "asset-based welfare" by Sherraden - saw asset redistribution less as an egalitarian measure than as one which supported poverty reduction by encouraging saving. Sherraden argued that owning an asset led to people changing their way of thinking, being more likely to plan and invest in their future - in a way that providing people with an equivalent flow of income does not. The idea of a universal account for all children first appears in Sherraden's Assets and the Poor (1991).
In the UK, the idea took off in 1999/00 with a number of contributions to the New Statesman in 1999, including an article from Robert Reich endorsing the idea; and support in 2000 by the influential Institute for Public Policy Research. Sherraden's Center for Social Development collaborated with the IPPR, and a briefing paper by it remarked "It would be impossible to overstate the leadership and contributions of the Institute for Public Policy research in informing and shaping this new policy direction in the United Kingdom". This carried through into proposals being included in the Labour Party's 2001 general election manifesto.
The Child Trust Fund scheme was promised in the Labour Party's 2001 general election manifesto, and launched in January 2005, with children born on or after 1 September 2002 eligible. Over the course of the development of the policy up to implementation, it became increasingly focussed on encouraging the poor to save and to develop their financial skills, with less emphasis on the egalitarian redistribution of assets.
According to the Institute of Public Policy Research
The wealthy have always relied on assets to smooth the path into adulthood, but now every single child will be able to do the same. The lumpy costs, the risky decision, and upfront investment involved in making ones way in life will be eased, whether that means spending money on training, starting a businesses - or simply buying the suit needed to attend an interview... CTFs recognise that assets, not just income, can bring security and opportunities.