Child Trust Funds

The Child Trust Fund (CTF) is a government initiative to encourage long term saving plans for children. Every child born on or after the 1st September 2002 receives a £250 voucher to open their account.

Features of a Trust Fund -

.A maximum of £1,200 per year can be saved in an account

.Trust Fund income and gains are tax free

.The child owns the account and is the only person allowed to withdraw the money.

.Investment decisions may be taken by the child from 16

.Money can be withdrawn from the age of 18

.A further £250 voucher contribution is made by the government when the child is 7 years old

Is your child eligible?

Your child is eligible for a child trust fund if -

.Born on or after the 1st September 2002

.He/she lives in the UK

.You receive child benefit for your child

.Your child is not subject to immigration control

Once you have applied for your Child benefit you will receive your CTF voucher and will be able to open your account. Various providers are available for you to choose from, they are all government approved and must adhere to a specific set of financial rules governing CTF providers.

The CTF is a long term saving and investment account.

There are 3 different types of account -

.Savings accounts

.Accounts that invest in shares

.Stakeholder accounts

Savings Accounts

These accounts do not invest in shares and only pay interest on the cash invested. This is a low risk account.

Accounts that invest in Shares

These accounts invest by purchasing shares in companies; if the value of the companies' shares increase then the investment will make money. This is a higher risk account than the Savings account but shares tend to gain in value over the longer term.

Stakeholder Accounts

These accounts also invest by purchasing shares in companies. Money is not invested in individual companies so the risk is reduced if a particular company performs badly. Charges on stakeholder accounts are limited to 1.5% per year (other accounts are not restricted in this way). The account is managed according to the child's age with lower risk investments made once your child reaches 13. This is a medium risk account.

A child may only hold one CTF account but you can change the CTF provider at any time if you believe moving the fund will benefit your child.

For the latest information on Child Trust Funds visit the Government website for Child Trust Funds

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