Child Trust Funds (Amendment) Regulations 2010

My Lords, these draft regulations introduce new government payments to the child trust fund accounts of all disabled and severely disabled eligible children. As noble Lords will know, the child trust fund is a long-term savings and investment account for children born on or after 1 September 2002. Children are eligible if they live in the UK, child benefit has been awarded to them and they are not subject to any immigration restrictions. The child trust fund is an important part of the Government’s savings strategy. It is an ambitious initiative that will ensure that every child, regardless of their background, has a financial asset at the age of 18. It promotes positive attitudes towards saving and will help to strengthen the financial education of both children and adults by bringing financial education to life. When parents are awarded child benefit for a child, they are automatically sent a child trust fund voucher which they can use to open the account of their choice. Almost three-quarters of parents have so far chosen to open an account on behalf of their child. However, if, for whatever reason, parents do not use the voucher within 12 months, the Government open a stakeholder account with a financial provider on behalf of the child. That ensures that no eligible child misses out on a child trust fund. The Government contribute £250 into the child trust fund accounts of all eligible children when it is first opened and again when the child is aged seven. Children from lower income families receive a further £250, both initially and again at the age of seven. There are also special arrangements in place to ensure that children in care, who may not be in a child benefit award, do not miss out on an account. The Child Trust Funds Act contains powers to allow the Treasury to make regulations that provide for further government payments to be made into accounts of eligible children, such as those that that we are debating today. These powers have been used before, for example to introduce government contributions at the age of seven. Recognising that children with disabilities may need extra support to make the best of their potential on entering adulthood, the Chancellor announced in the 2009 Budget that the Government would contribute an additional £100 into the child trust funds of disabled children every year, with severely disabled children receiving a total of £200 each year. Children entitled to any rate of disability living allowance at any point within a tax year will receive £100 into their child trust fund, and children entitled to the highest weekly rate of care component of disability living allowance at any point in the year will receive £200 into their child trust fund. That is in line with the definition of severe disability used elsewhere in the tax system. These new payments will start to be made in April 2010 for children who were entitled to disability living allowance in 2009-10. The Government intend to make these payments to disabled children throughout the life of their child trust fund. This secondary legislation provides for payments until 2018, when the first eligible children turn 16 years of age, because that is what is achievable under the current powers. The Government intend to make an amendment to the child trust fund primary legislation before 2018 to enable payments to be made to the child trust fund accounts of all eligible disabled children, including those aged 16 and 17. Payments will be made into the accounts of disabled children using the same process used for other government contributions, such as payments at age seven. Child trust fund providers are already familiar with that process and will not have to make any changes to their IT infrastructure to cope. Therefore, the impact on business will be minimal. Her Majesty’s Revenue and Customs will extend the existing data feeds from the Department for Work and Pensions to get information about which children are entitled to disability living allowances and thus entitled to these new child trust fund payments. Those payments will be made automatically and no claim will be required on behalf of the child. Noble Lords may be aware that these regulations have already been debated in the other place, where both main parties offered no objection to their introduction. The Government recognise that children with disabilities often have greater financial needs on entering adulthood and therefore need extra support to make the most of their potential. The regulations provide for the Government to make annual contributions of £100 into the child trust funds of eligible disabled children and £200 into the accounts of severely disabled children starting this April. I beg to move.