Baby Bonds Bonanza

Gordon Brown's Budget included cash for kids

By Working Lunch's Simon Gompertz

In yesterday's budget the Chancellor announced trust funds worth at least £250 for all babies born since last September.

But what do you think of these so called "baby bonds"?

You'd have to be seven months or younger to qualify for a Child Trust Fund, but whether they'd missed out or not, the concept seemed to be welcomed by the people I asked today.

Popular response

"It encourages people to save for their children rather than just spend the money," said Sue Cunningham.

Janice Sherif said, "It's a good idea, and I hope they'll use it wisely."

"If you're wise you'd use it for university or books, or certain things like that, and I think it's a great idea personally," said Yasmin Latchin.

How it works

The Trust Funds will work like this;

A third of children whose parents are in lower income groups will get £500 to start with, while the rest will get £250 from the state.

Then parents, family and friends can put in £1000 a year on top of that.

There will also be additional state payments at the ages of five, 11 and 16 years.

How it can be used

The money can be used by putting it in savings accounts or riskier investments.

There will be no tax on fund growth, or any interest gained, and aged18, the child as was, can take the money and use it as he or she wants.

The Child Trust Fund will be like an individual savings account, or ISA, for children, except there's free money on offer so you'd be mad to turn it down.

Danger

But there is a danger that some families will take an excessive risk in investing the money.

Potentially, though, a child's fund, if added to, could grow to many thousands of pounds.

Then of course, there'll be the temptation to blow it all on holidays or parties, in which case the contribution from the taxpayer will have been wasted.

Kerry Nelson

"My major concern, and it's something the government should look at before issuing this, is to make sure that these funds are held or ring-fenced," says Kerry Nelson of Bates Investment Services.

"This means they'll end up doing what is intended; that they are used to give children from low-income environments a chance to start their life, go into education, and train.

Children born from September 1st last year will qualify, but full details won't be published for a few months and you probably will not be able to apply until 2005.