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Child Trust Fund

Type Benefit - Chidren

Child Trust Fund

Description  Announced by the government in the April 2003 budget, Child Trust Funds (CTFs) aim to provide every child with an asset realisable at the age of 18, and perhaps more importantly, to encourage young people to become interested in responsible personal finance.

The scheme started for all children born on or after 1 Sep 2002. For each such child parents receive a 250 voucher. Children from low income families receive an extra 250 which has to be paid directly into your CTF account.

CTF accounts are provided by many financial companies. The accounts are operated under strict government regulations, and have to be one of 3 types:

  • Savings accounts, secure accounts repaying the capital plus interest.
  • Accounts that invest in shares, ie medium risk accounts that invest in equities. Even single equity accounts are allowed.
  • Stakeholder accounts, here the funds must be invested in a number of equities to spread risk, and when the child reaches 13, the funds must begin to be moved into more secure cash assets.
  • In the budget of April 2006 it was announced that all eligible children will benefit from a further payment of 250 into their CTF accounts at age 7, with children from lower-income families receiving 500.

    In addition to the payments from the government, the child, his/her parents, and any other benefactor can top up the child's CTF with additional contributions totalling up to 1200 a year.

    Why in 100 Best?
    It's a freebie. So not surprisingly the CTF is very popular with parents, with over 75% setting up a CTF account (if you are one of the 25% that don't bother the voucher will be put into a default CTF account.)
    Links
    Child Trust Fund Website
    Child Trust Fund at HM Treasury


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    Listing contributed by Andy

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    Best Personal Finance - Guide To Child Trust Fund - Information, Pros, and Cons - 2 votes