Two of the savings measures in the government’s crosshairs are the pension credits and Child Trust Funds (CTF) set up under Labour.
The CTF is (or was) a savings and investments account for children born after 1st September 2002. The child would receive a Â£250 voucher that would kick-start their account. The money belongs to the child and it cannot be touched until their 18th birthday. There are then ways throughout the time until their 18th birthday that contributions can be made to the account to enable it to grow in value. This would enable a savings pot to be accumulated so as to give the child a solid financial start to their adult life.
According to the Chancellor’s statement today however, government contributions to these accounts will cease. The first move will be to scale back contributions in August this year with total cessation by January 2011.
According to Ros Altmann reported by CityWire, we could see a phasing out of pension credits over a ten year period as a part of the whole pension reform project. Pension credit is split into two parts, guarantee credit and savings credit.
Guarantee credit is payable in certain circumstances to those over 60 (going up to 65 in stage to 65 between now and April 2020). The intent is to ensure a minimum weekly income once you have reached the required age.
Savings credit is payable over the age of 65 and is designed to give a small reward for the extra provision you have made to your own retirement savings.
With the LibDem part of the coalition’s commitment to a ‘citizen’s pension’ we could see a substantial increase in the state pension making pension credits no longer required. So this will not be a saving, at best cost neutral it may well cost more in the long run.