Parents could be missing out on potential tax savings by not investing in their child trust funds (CTF).

Child trust funds bring investors tax relief, yet many parents are not taking full advantage of the tax breaks offered by the investment, Unbiased.co.uk has said.

Research by the company indicates that 71 per cent of parents have opened up and invested in a child trust fund since April 2005.

However, less than half will miss out on investing the full allowance allowed in a year (£1,200), which equates to a waste of £125 million in tax breaks.

Chief executive of Unbiased.co.uk David Elms remarks that parents should seek independent financial advice to help them with their investments.

Parents don’t have to pay tax on the interest earned on a CTF [child trust fund] account and by not using their full funding allowance each year they may potentially be gifting the taxman more money than necessary, he comments.

Mr Elms adds that consumers will waste a total of £7.9 billion this year in taxes that could have been saved.

Yesterday, business manager for Bestinvest Hugo Shaw urged parents to open up their own child trust fund without waiting for the government to do it automatically.