THE Government will give an extra £250 to children qualifying for the child trust fund when they reach the age of 7, with the poorest children likely to receive an extra £500.

The extra payments, which the Chancellor hopes will “encourage a savings culture for both families and children”, are subject to consultation with the savings industry, the Chancellor said.

He will be speaking to banks and building societies about the level of payments for all children as well as whether the ratio of funds given to poorer children (currently proposed to be 2:1) is set at the right level.

Gordon Brown’s pledge to top up the funds was welcomed by the industry. David White, chief executive of the Children’s Mutual, a friendly society, said: “It is good news that the Government is considering this level of top-ups. This is a sensible place to start.”

However, he pointed out that with two million accounts due to be opened in the first quarter of next year, further consultation would be essential. “We need to see who is investing their money and where they are investing it.”

Will Paxton, of the Institute for Public Policy Research, said: “The extra endowments at age 7 are a big and unexpected boost. All newborn children, whatever their backgrounds, can now expect to turn 18 with an even larger nest-egg.”

The top-up payment of £250 in year 7 would mean a child whose parents have made no additional contributions to its fund would be left with a fund worth £1,217 at 18, instead of a fund of just £714 without a top-up. Children who receive an extra £500 could see a final fund worth £2,433.

Daniel Godfrey, director general of the Association of Investment Trust Companies, said: “Top-ups at age 7 would provide an ideal opportunity for children and their parents to learn about investing through hands-on experience and would have wider long-term benefits than their monetary value.”

All children born on or after September 1, 2002 are eligible for a child trust fund, provided that their parents claim child benefit.

All children will receive at least £250 initially, with £500 paid to children whose family’s gross income is less than £13,480 this tax year.

Parents will receive vouchers for the funds in January and February 2005, with accounts due to be up and running from April.

• The Labour MP Clive Betts argued in the Commons that there should be a debate so that Tory and Liberal Democrat MPs who did not agree with the Child Trust Fund could “explain whether it will simply be scrapped for children from a future date . . . or whether it is their intention to take back from the piggy banks of children bonds that have already been given?”

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