Child Trust Fund Account - CTF

The Child Trust Fund (CTF) was first announced by Gordon Brown in his April 2003 Budget as a government scheme to encourage savings and investments and to educate people at a young age about the benefits of savings and investments.

The basic premise behind the Child Trust Fund was for the government to give every child born on or after the 1st of September 2002 a voucher worth a minimum if 250 pounds and could be as much as 500 pounds - depending on the the family’s financial situation at the time.

CTF Eligibility

Your child is eligible for the Child Trust Fund account as long as:

-your child was born on or after 1st September 2002;
-your child lives in the UK ;
-you receive Child Benefit for your child; and
-your child is not subject to immigration control.

First step towards your CTF...

If your child is registered to receive child benefits then he or she will automatically be sent a voucher worth 250 pounds by the Inland Revenue. 

This voucher will be valid for one year.  Ideally your should invest your child's CTF voucher as soon as you receive it in order for the money to start growing ASAP.  But don't worry if you miss the deadline, your child will not miss out on the Child Trust Fund because the government will open the account on his/her behalf.  

When you receive your voucher, it will need to be deposited in a special Child Trust Fund account. This CTF account will be  held and managed by government-approved providers and distributors of the CTF.

The initial list announced by the government on the 11th of January  includes 75 official entities approved to provide for the CTF.

The person who opens the Child Trust Fund Account (known as the ‘registered contact’) – will be the main point of contact for the CTF account and will have full responsibility for it until the child reaches the age of 16 at which time the child takes over the responsibility of their CTF account for themselves.

Your child's CTF account will be free of income tax and capital gains tax, meaning that there will be no tax to pay on any interest or gains made on the money in the CTF account until he or she takes out the investment at age 18.

In addition, anyone else such as family and friends can make further contributions and deposits into your child's CTF account each year, up to a total of £1,200/year. There will be no tax to pay on any interest or gains made on this money either. On the child’s 7th birthday, the Government is set to make a further (yet to be disclosed) contribution.

At the age of 18, your child's CTF account will achieve maturity, at which time your child will have unrestricted access to the money which, if fully funded, could be worth as much as £25,000.

Things to consider when choosing a Child Trust Fund provider or distributor

-the fee for running the account,

-whether you have to top-up the CTF account on a regular basis

-the return on investment on the Child Trust Fund Account

Its important to note here that you are able to change providers if you are unhappy with the service of your current provider .  This change should be free of charge and the formalities of the transfer should be dealt with by your new chosen provider.

So who do you choose for your CTF?

Ideally you should pick a provider with experience, a long  history and a documented track record in investment and finance.