Is this another nail in the coffin for child trust funds? It emerged this week that thousands of children with CTF share accounts run by investment giant F&C could soon see the value of government contributions to their plans wiped out altogether following the introduction of a £30 annual fee.

CTFs were launched with great fanfare by Labour in 2005, then scrapped by the coalition government in 2011 as part of the spending cuts. A replacement scheme, the Junior Isa, was later launched, but the two have not been merged, prompting many to claim that it is unfair that children with CTFs can't move their money over to the new products.

F&C is one of the key child trust fund players; around 60,000 parents and guardians have paid CTF vouchers worth either £250 or £50 into its shares account, with many topping them up with monthly or lump sum contributions. F&C's shares account CTFs allow access to up to 12 investment trusts, including the flagship Foreign & Colonial Investment Trust.

Children born between 1 September 2002 and 2 August 2010 received a £250 government contribution into their funds, while those born between 2 August 2010 and 2 January 2011 received £50. The vouchers were offered by the government as an incentive to save.

According to F&C, around 2,000 children currently have balances of £250 or less in its shares accounts. For their parents or guardians, the impact of the £30 charge could mean that, depending on investment returns, in just eight years or less there could be nothing at all left for their children.

The fee will be introduced from 6 April this year and is on top of annual management fees, which vary depending on the investment trust. The Foreign & Colonial Investment Trust, for example, charges 0.365% of the fund value each year. The first deduction will be made on 5 October this year, to cover the previous six months.

F&C said it would offer those with less than £250 in their accounts a £20 top-up if they want to transfer their money to another provider. There is no charge to move.

Patrick Connolly, of independent financial adviser AWD Chase de Vere, says: "While £30 a year doesn't sound like much, it will make a huge difference to the returns from smaller accounts. For somebody who has £500 invested, this means an additional charge of 6% per annum."

The greater the value of your investment, the less impact the charge will have. According to F&C, the average value held in F&C's shares account CTF is approximately £3,300, so, for the average investor the fee equates to an annual management charge under 1%.

The fund manager says the charges have been introduced to cover the administrative costs of running the accounts. Marrack Tonkin, head of investment trusts at F&C, says: "Our decision to introduce a new charging structure was not taken lightly, but helps to ensure our products remain competitive for savers with a commitment to long-term investing." The fee does not apply to the company's stakeholder CTF. This is essentially a tracker fund, but charges are still steep at 1.5%.

Darius McDermott, managing director of discount broker Chelsea Financial Services, says: "CTFs were already suffering from inferior choice and higher charges for investments, as well as lower rates for cash saving. F&C was the one beacon of hope for some decent returns and now they will be eroded by this additional charge.

"CTFs are a dying breed, and the cost of providing them is clearly outweighing the benefits for providers who want out. I am extremely disappointed in the lack of action from the government and the frankly lame excuses for not merging the CTF with the Junior Isa. A generation of children are being disadvantaged."

If you decide to stick with F&C but don't want fees to eat into your child's investment returns, you can opt to pay the charges by direct debit rather than have them deducted from the account.

Unfortunately, there are limited options for those wanting to transfer their money away from F&C, as it is not alone in imposing high charges. For example, at the start of last year, Witan, which runs the Jump CTF, announced it was replacing its 1% annual management charge with a £36 flat fee. Other providers are expected to follow suit.

Connolly says: "If you are thinking of moving, we recommend the Child Investment Account from the Share Centre. This CTF provides access to a wide range of good-quality fund options including Invesco Perpetual High Income, M&G Global Basics, First State Global Emerging Market Leaders and the Jupiter Merlin Worldwide, Balanced and Income Portfolio funds."

The Share Centre account has an initial dealing charge of 1% then an annual charge of 0.5%, so the total annual charge for any of the funds mentioned above is 2% a year. Connolly says: "This is expensive for a normal investment, but sadly not for a CTF, where charges are typically more anyway."