A campaign has been launched to save Child Trust Funds (CTFs) from being scrapped.
The scheme is expected to be one of the things to be cut by the new coalition government.
The Guardian reports that a number of thinktanks and academics have now launched a last-ditch bid to save the CTFs.
The thinktank Social Market Foundation (SMF) says that scrapping CTFs will only benefit richer families.
Ian Mulheirn, SMF's director, told the Guardian: "Limiting CTFs to the least well off may render them financially unviable. Keeping tax relief on other children's savings whilst drastically cutting the CTF scheme only benefits children from better-off families at the expense of the rest."
The Children's Mutual, which is one of the biggest providers of CTFs, told the newspaper: "The CTF is the most successful financial initiative we've ever had in this country, and it's not only the well-off who invest more than the voucher.
"Our figures show that 30% of households with an income of £19,000 or under typically save an additional £19 a month for their child via CTFs."
However the Guardian reports that the scheme has not been overwhelmingly successful.
A quarter of new parents didn't take up the option to open a CTF in the four years after their launch.
Before the election, the Liberal Democrats said CTFs should be scrapped altogether, saving £580 million. The Conservatives said they should be limited to families on incomes below £16,000, which would save around £400 million.
Kate Moore, head of savings and investments at Family Investments, told the Guardian: "Given Britain's financial circumstances, it is understandable that the new government is looking to cut costs, but the axe should not fall on an investment in our children's future.
"The scheme is relatively inexpensive and from 2020 – when the first of the CTF generation gains access to their fund – young adults will inherit a combined £2.5bn each year. To achieve this, the government has to make an annual contribution of under £500m into the CTFs.
"The CTF scheme has helped to create a generation with a head-start in life, and social mobility is likely to suffer if young people are unable to meet the costs of higher education or find the money required for a deposit on a first property."
What do you think? Should the scheme be scrapped?
Source: The Guardian
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