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Child Trust Funds Act 2004
"My Government will introduce a Bill that will provide all children born from September 2002 with a Child Trust Fund with an initial endowment from the Government and more for poorer children. This will mean that when children reach the age of 18 they have an asset to draw on as a springboard for the future."
Announced as part of the 2003 Budget, the child trust fund will ensure every child born after September 1 2002 receives at least £250 paid into a savings account, and made available for withdrawal when they reach 18 years.
Poorer families will receive extra money up to a maximum of £500, and an extra payment will be made into the fund when the child reaches seven years.
There will be no limit to what proportion of the fund can be linked with equities, although all providers who manage funds will have to offer a stakeholder account.
Friends and family will be allowed to top-up the fund with up to £1,200 per year.
The document, Detailed proposals for the Child Trust Fund, explained that primary and secondary legislation would be needed to implement the plans.
As the law stands currently, where a gift from a parent gives rise to income of more than £100 in a year, parents are then taxed on all that income at their own tax rate.
The passage of this Bill will mean contributions to child trust funds will not count towards this limit.
Legislation is also required to allow the Inland Revenue to open a stakeholder fund account for children put in care after birth or soon after arriving in the UK.
It might be thought of as relatively uncontroversial, but the scheme has thrown up a number of sticking points and may not experience a smooth ride.
Home secretary David Blunkett has reportedly called the plans a "major disappointment".
David Cracknell of The Times wrote on November 9 2003 that Blunkett was concerned about fraud, and the complications that might arise if children of asylum seekers were granted funds.
And for the financial services industry, one issue remains key - how much will they be able to charge for administering the funds?
Paula Hawkins of The Times wrote on October 29 2003: "The industry has been pressing for a "realistic decision" on annual management charges, by which it means that the price cap must be higher than the one per cent [of the fund's value] originally suggested."
Progress
House of Commons
First reading: November 27 2003 (HC Bill 1)
Second reading: December 15 2003
Standing Committee A
Remaining stages: February 2 2004
House of Lords
First reading: February 4 2004 (HL Bill 25)
Second reading: February 26 2004
Committee stage:
Bill as amended in the committee (HL Bill 48)
Report stage: April 26 2004
Bill as amended in the report (HL Bill 63)
Third reading: May 4 2004
House of Commons
Consideration of Lords amendments: May 13 2004
Received royal assent on May 13 2004
Child Trust Funds Act 2004
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