Aug 31 2006
Child Trust Funds (CTFs) are ever growing in stature as Nationwide claims that increasing number of parents back the government-approved savings scheme for children.
Uptake figures fell in July, a traditionally quiet month for investments of that sort, but analysts predicted an upsurge as the school year starts in September.
Parents and grandparents who choose to add to the minimum £250 voucher the government donates will be helped by Britannia Building Society's decision to increase the interest rate on its CTFs to 6.25 per cent with effect from September 2nd.
Britannia's move followed a similar rise earlier in the month by the Yorkshire Building Society, which upped its CTF rate to 6.35 per cent and also increased its 30 Day Individual savings account (Isa) to 5.25 per cent and E-Isa and Youth Account to 5.15 per cent to help the slightly older saver.
The success of Isas was shown by a Datamonitor study revealing a rise of almost a third in Isa balances, with figures reaching £188.9 million, meaning 2005 was the strongest year for Isas since 2002.
Meanwhile Leeds Building Society promised a guaranteed five per cent return on its Isas, with savers able to withdraw up to half of the amount invested without notice or penalty.
Birmingham Midshires gave a possible reason why some might want to raid their Isas, suggesting that many are tempted to dip into their accounts to pay for a holiday or weekend break rather than leaving the cash tied up earning interest.
The flipside of the government's generosity on CTFs and our generally good savings habits was the ever-enlarging spectre of inheritance tax (IHT), with a reported 72 per cent increase in properties hitting the £285,000 value threshold for the tax between 1998 and 2004.
Halifax noted that had the IHT threshold risen in line with house prices rather than inflation, it would now stand at £430,000 and urged the government to make that change to protect middle income homeowners from the tax traditionally designed to hit the upper classes.
They were backed by Labour MP Stephen Byers, who called the tax "a penalty on hard work, thrift and enterprise".
The rise in property prices was having wider effects, with a poll by the Abbey bank claiming that 23 per cent of first time buyers now expected help from their parents to help them out with payment on a deposit, or at least act as a guarantor on the purchase.
However, despite these concerns, Britons have kept diligently saving, with Birmingham Midshires finding that the average person had £7,548 available in liquid savings, nearly double the recommended minimum provision for emergencies.
