Government set to launch ‘baby bonds’


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In advance of the imminent general election, the government has announced plans to bring in a national ‘baby bond’ scheme worth £1 billion pounds, should it be elected to a second term in office.

The idea is that every child born will immediately receive a payment worth anything up to £500, depending on the financial circumstances of the parents. This sum is then invested for a minimum of three years then can be cashed, placed in a trust or stakeholder pension fund or re-invested in an ISA.

The rationale behind this move, which has yet to through the consultation stage, is to encourage the nation to save by providing both the wherewithall to start everyone off – and the incentive to keep going. In the words of Gordon Brown, Chancellor, ‘To ensure that every child has the best possible chance in life, we plan not only to improve the weekly incomes on which a child is reared, but to make it possible for them to own and value wealth.’

The initial sum will be topped up by anything between £50 and £100 on three times subsequent occasions – when the child starts going to school at the age of five, when the child moves up to secondary education at the age of eleven and then again when the child turns sixteen. During this time relatives can contribute to the fund – which remains tax free and does not affect family entitlements such as housing benefit and working family benefits. Furthermore the government will match pound for pound the maximum sum saved up to a ceiling of £1,800.

Handled prudently, the original sum could be worth anywhere between £5,000 and £7,00 by the time the child turns eighteen – enough, it is claimed, to start a small business or fund tertiary education.

As some 750,00 babies are born in the UK each year, the ‘baby bond’ scheme is not going to come cheap. However, the government feel the long term benefits are priceless and will change the outlook and financial stability of our society forever. Said David Blunkett, education and employment secretary, in an interview with The Guardian, ‘It’s about self help. Kids who grow up in a household where no one is working or has any savings end up with very dangerous role models. It has a knock-on effect for their own performance in schools and in work so we are trying to break that cycle.’

Government research indicates that 70% of lone parents do not have any savings – and nor do 50% of households on low/middle income levels.

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