Child Trust Fund Savings Accounts
[NOTE: The closure of the Child Trust Fund Scheme was officially announced by government in May 2010. Government payments into the Scheme will be phased out after 1 August 2010 and the Scheme officially closes on 1 January 2011. The information that follows here relates, therefore, to a discontinued scheme and is for reference only.]
Child Trust Fund savings accounts are one of the three types of savings accounts for children specifically designed to receive the money from your government Child Trust Fund voucher.
Child Trust Fund savings accounts are an ideal way of saving money for your child in a way that is as secure as a bank account. If you invest £500 in one of the many Child Trust Fund savings accounts available, your child will receive back at least the £500 you put in, plus any interest that has accrued.
Because of the maximum level of security they offer, Child Trust Fund savings accounts are, of all available child savings accounts, preferred by those who do not wish to see their child savings placed in higher risk stock market investments.
Child Trust Fund savings accounts are a very cautious and low-risk investment. Over the long term, however, they generally do not perform as well as stocks and shares investments.
You have the option to invest the child trust funds voucher in a few different ways so it is worth discussing this with a financial adviser who can help gauge the best option for your child’s money.
Speak to our financial advisers on 0800 678 5929 or submit a savings enquiry to receive a callback
Child Trust Fund Savings Accounts
The Child Trust Fund scheme was set up by government to provide all children born after 1st September 2002 with child savings accounts and a lump sum payable to them on their 18th birthday.
There are three products designed for child savings contained in the Child Trust Fund scheme. Child Trust Fund savings accounts are the lowest risk option, because they offer maximum security of a cash investment. However, at times when interest rates are low, cash savings are a less attractive option and indeed may fail to keep pace with inflation, so that the real value of your child savings may be reduced rather than increased.
Once Child Trust Fund savings accounts are opened with the £250 voucher provided by government, additional payments into the account can be made by parents, relatives and friends, up to a limit of £1,200 per year.
Parents receiving Child Tax Credit may receive a second amount of £250, bringing their total for opening their Child Trust Funds savings account to £500. Government makes a second payment of £250 directly into your child’s fund when he or she turns seven. Again, parents receiving Child Tax Credit may be eligible for double that amount.
Income and gains in Child Trust Fund savings accounts for children are paid out free of tax. The savings in Child Trust Fund savings accounts are paid out when your child turns 18, and the money can be used for any purpose your child decides.
Would you like to find out more about savings for your children? Speak to our friendly advisers who can help find the best option for you.
Call 0800 678 5929 or make an online savings advice enquiry to receive a callback
