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Parents waste tax-free savings

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Roughly £242m will be wasted this year by parents who don’t take advantage of the full tax breaks associated with Child Trust Funds.

Research from website, which promotes the benefits of independent financial advice, has revealed 75% of eligible children have had a CTF opened for them. However, only 24% of the accounts opened since 2005 have recorded additional deposits. If half of the remaining accounts received their maximum funding, the amount of additional tax saving would equate to £242m, according to Unbiased.

David Elms, chief executive of Unbiased, said: “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.”

CTF vouchers can be claimed within the first 12 months of a child’s life and can be invested in cash or equities with a range of different risk profiles. For more information, see the November/December 2008 issue of Your Money, on sale 24 October.

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