Child Stakeholder 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 stakeholder accounts offer a stocks and shares investment for your child savings, where risk is minimised by certain government restrictions on how the funds can be invested. Child Trust Fund stakeholder accounts are the default accounts that will be used by HM Revenue to invest the £250 start-up voucher for any parents who fail to open a Child Trust Fund account within 12 months.
The first restriction applying to Child Trust Fund stakeholder accounts is that a spread of risk must be in place. In other words, the fund must invest in a number of companies, so that savers do not lose out if one particular company does badly. This recognises the fact that, at the same time, other companies included in the investment will do well, and offset any loss. This strategy is designed to reduce risk in child stakeholder accounts.
If you are unsure if a child stakeholder account is the most suitable option for your Child Trust Funds voucher, please speak to one of our advisers who can help.
Call 0800 678 5929 or request a callback via our savings enquiry
Child Trust Fund stakeholder accounts are also required to further reduce the risk level of your child’s investment over time. Once your child turns 13, the funds invested will gradually be switched to investments with a relatively lower risk to stocks and shares, such as cash or bonds. While monies shifted out of the stock markets in this way will no longer benefit from stock market growth, they are also protected from potential downturns as well. The net result is a gradual lowering of risk in stakeholder accounts for children, as they approach the end of the savings term on their 18th birthday.
Child Trust Fund stakeholder accounts are also required to accept minimum payments of just £10 into the account, to facilitate small or occasional contributions from parents, relatives and friends.
Management fees in child stakeholder accounts are also kept to a minimum, with a government restriction which caps them at 1.5% per annum. Fees for other child trust funds are not limited in this way.
Child Trust Funds – stakeholder accounts
Once Child Trust Fund stakeholder 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 voucher amount of £250, bringing their total for opening their child stakeholder accounts to £500. Government makes a second payment of £250 directly into their child stakeholder accounts when children turn seven. Again, parents receiving Child Tax Credit may be eligible for double that amount.
Income and gains in stakeholder accounts for children are paid out free of tax. The savings in Child Trust Fund stakeholder accounts are paid out when your child turns 18, and the money can be used for any purpose your child decides.
Get child trust funds advice from one of our friendly advisers on 0800 678 5929
