Best Child Trust Fund (CTF)
[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.]
The Child Trust Fund scheme has taken an important position among savings for children. The scheme was set up by the government for all children born after 1 September 2002, and parents receive a voucher for £250 which can only be used to set up a Child Trust Fund for their child.
Choosing a Child Trust Fund Account
The voucher you receive is intended as the start of a longterm savings account for your child. Many parents find it is difficult to know the best place to save this voucher, so in many cases parents approach their financial advisers for help.
Speak to one of our friendly advisers about your Child Trust Fund voucher, please call 0800 678 5929 or submit a savings enquiry here
Types of Child Trust Fund Accounts
There are 3 main types of child trust fund account:
1. Savings Accounts
Your child will get the amount invested plus a little interest. You must consider the effects of inflation and that it may have more potential for growth if it was invested in shares.
2. Share-based Accounts
Your Child Trust Fund voucher is invested in shares. This type of account has the potential to do well as it is a long term invesment. However there is a degree of risk involved as shares can lose value, yet historically share investments generally outperform savings accounts.
3. Stakeholder Accounts
Your child’s money is also invested in shares, but the risk is reduced because the Government has put several rules in place. HMRC will automatically put your child’s voucher in a stakeholder account if you do not use the voucher before its expiry.
Get help find the best child trust fund on 0800 678 5929 or make a savings enquiry here
Additional Child Trust Fund Payments
Parents receiving Child Tax Credit are eligible for a second amount of £250, bringing their total 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.
Additional payments into the account can be made up to a limit of £1,200 in any given year, not only by parents but by relatives as well. Such lodgements make the fund an ideal vehicle for donations in lieu of a birthday gift, for example. Most importantly, income and gains in the account are paid out free of tax. As the child has access to the funds when they turn 18, these funds can be used to plan for university, but of course this is just one option – the money can be used for any purpose your child decides.
The children’s stakeholder pension scheme is a government-approved initiative which is open, not just to you as parents, but to others interested in the welfare of your child as well. This means that contributions are also possible by relations, grandparents, godparents and family friends. As such, the fund can become a focus where relatives can invest in your child’s future, by giving cash rather than the more traditional birthday or Christmas gifts.
