Neil Lovatt: Revenge of the baby boomers: why they want to axe our CTFs

WE ARE all aware of the pain that is going to follow the next general election.We also know that the prospect of the inevitable cut is not particularly appealing; witness David Cameron and George Osborne's shrewd but unmistakable U-turn from talk of a new "age of austerity" to "cuts in a few years' time".

But what was striking about the shift on spending and the shelving of cuts was what remained – the axing of child trust funds (CTFs). Indeed, of the few cuts spelt out by the Conservatives or the Liberal Democrats for that matter, CTFs seem the least unpopular.

Of course, as someone who works for a provider of CTFs, I'm bound to be biased in their favour. But I equally work with pensions and Isas and all other forms of savings and investment and still can't see the logic in axing children's savings.

It's so disappointing to see them singled out while proposals abound for Isa and pensions to have their tax benefits extended.

Witness the increases in the Isa limits (already rushed through for the politically important baby boomers) and the Conservative proposals to abolish compulsory annuity purchases at 75. I'm all in favour of these proposals but, at a time of fiscal tightening, I don't see the logic in cutting CTFs while extending other tax-favoured products. The Conservative and Liberal Democrat consensus on their removal is simple; they have failed due to a poor take-up rate.

A poor take-up rate? Let's consider that for a moment. The percentage of CTFs opened by parents is 75-80 per cent, which arguably makes it one of the most successful financial products ever launched in the UK.

Now you could argue that this is not a fair statistic as the government gives away "free money" to open the account and it's no wonder the take-up rate is so high. Of course, they also give away free money with pensions (in much greater sums than the CTF 250) and the take-up rate of these is around two-thirds of the population.

Of course, you could then reasonably argue that take-up rate is actually defined as those who invest over and above the government voucher.

According to the Tax Incentivised Savings Association, around 27 per cent of CTF holders have made some form of additional contribution. Contrast this "poor take-up rate" with the total number of Isas in existence at the end of the last tax year – 14.4 million. After more than ten years in existence, this means just 28 per cent of the UK adult population have bothered to open an Isa.

Whichever way you look at it, CTFs have held their own against other forms of tax favoured savings and they can provide greater social benefits in the years to come by creating a generation of first-time savers.

If you are disappointed in CTFs then you should be equally disappointed in Isas and pensions. So why cut CTFs while extending pensions and Isas? Sadly, I fear the reason is simply that the latter two benefit the electorally abundant baby-boomer generation. The Conservative front-bencher David Willetts has just published a brilliant new book, The Pinch – How the baby boomers stole their children's future. He should really give a signed copy to George Osborne and the Liberal Democrat finance spokesman Vince Cable.

• Neil Lovatt is sales and marketing director at Scottish Friendly.