The Child Trust Fund
What Is The Child Trust Fund?
The child trust fund has been set up by the government. All babies born from the 1st September 2002 will have an account set up for them with an initial amount. These accounts will not be available until April 2005.
The amount deposited will not be accessed by the child until they reach the age of 18. They can then decide whether to take the money for education, deposit on a house or reinvest the funds.
How Do I Set This Up For My Child?
As soon as you make a claim for child benefit you will receive a voucher which enables you to open up the fund with a provider of your choice. More than 1.7 million vouchers worth more than £500 million will be delivered by April. An accompanying information pack will also be distributed.
How Much Money Will My Child Get?
Each child will get an initial amount of £250.00. For those families who are in receipt of full child tax credit the amount could rise to £500.00. The government are hoping to add an additional amount to this once the child reaches seven years old, but this has not been confirmed yet. Your child will be considered eligible provided she lives in the UK and currently receives child benefit
There will be extra money for babies born between September 2002 and April 2005 to compensate for the delay in opening their accounts. The value of vouchers will be as follows:-
- Children born between September 1st 2002 and April 5th 2003 will receive £277
- Children born between April 6th 2003 and April 5th 2004 will receive £268
- Children born between April 6th 2004 and April 5th 2005 will receive £256
- All babies born after April 6th 2005 will receive £250,
What Should I Do With The Voucher?
The money has to be saved or invested. When you receive your voucher you can use it to open a bank or building society in your childs name. Alternatively, it can be invested with an investment, insurance or other financial provider. Providers must offer a Stakeholder Account which has a capped charge of 1.5% and controlled risks. You are able to change accounts and providers as many times as you wish.
What Happens If I Do Not Use My Voucher?
If you do not open an account with your voucher within twelve months of receiving it, the Inland Revenue will open a stakeholder account for you.The money in your childs CTF account will not affect any family benefits or tax credits.
What Is A Stakeholder Account?
A stakeholder account invests the money in stocks and shares.
When Will The Child Trusts Become Available?
The accounts will become available after April 2005
Can I Add To The Fund?
Yes, of course. You and your family can add up to £1,200 a year, with the minimum amount a year being £10.00 When your child reaches the age of seven the government make a second payment into the fund. This amount is presently not known. There will be extra money for children from low income families.
How Will This Money Grow?
According to Virgin Money if the baby's £250 fund grew at 7% over the 18 years it would be worth £705. If you invested an extra £10 per month the fund would grow to £4500. If you contributed your child benefit of £16.50 per week the CTF would accrue £27,900 after 18 years. CTF savings are tax free and an annual statement will let you know how the money is performing.
Who Can Access This Account?
Only your child will have access to this fund once they reach 18 although they will gain control of it by 16. Parents will have no access to the money. Schools will run a financial education incentive to help children learn about the CTF and how best to manage their money.
Click here to learn more about Child Benefit
Click here to learn more about the Child Support Agency
Click here to learn more about Child Tax Credit
One of our readers recommends http://www.thechildrensmutual.co.uk/moneyguide, a helpful resource from the Children's Mutual.
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