Child Trust Fund
From Wikipedia, the free encyclopedia
A Child Trust Fund (CTF) is a long-term savings and investment account for children in the United Kingdom. The UK Government introduced the Child Trust Fund with the aim of ensuring every child has savings at the age of 18, helping children get into the habit of saving whilst teaching them the benefits of saving and helping them understand personal finance.
Children living in the UK for whom Child Benefit has been awarded and who were born on or after 1 September 2002 are entitled to a Child Trust Fund account, with an initial subscription from the Government in the form of a voucher for at least £250.
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[edit] Eligibility
Every child born on or after 1 September 2002 is eligible for the CTF, as long as:
- Child Benefit has been awarded for them;
- they are living in the United Kingdom; and
- they are not subject to immigration controls
The children of Crown servants - including the Armed Forces - posted abroad qualify because they are treated as being in the UK.
[edit] Types of CTF
Most advisers recommend equity-based CTFs, and the fact that Revenue-allocated accounts will be put into stakeholder products indicates that the government also believes equities are the best option over such a long time.
[edit] Stakeholder Account
Stakeholder accounts invest in shares, the stakeholder standard means that there are certain rules for these accounts to reduce risk. These include provision for money in the account being gradually moved to lower risk investments or assets when the child reaches age 13. This is to help to produce a stable return in the run up to the child's 18th birthday.
The charge on the stakeholder account is limited to no more than 1.5 per cent a year, the charges on all other types of CTF account are not limited in this way.
[edit] Savings Account
These operate in a similar way to a bank deposit account, there will be a rate of interest and the nominal value of the funds is secure.
[edit] Non-Stakeholder Account
Invests funds according to the type of product, these accounts are not protected by the stakeholder standards.
[edit] Transfer of providers
CTF funds can be transferred between providers, the rules are similar to those for Individual Savings Accounts - customers should inform the new provider they wish to use and they will undertake the move.
[edit] Subscriptions
[edit] Government vouchers
- At birth The government gives every eligible child a voucher worth £250 to open the account, and also a further £250 directly into the accounts of children who live in low income families.
- At age 7 The government have now announced an additional payment of £250 into the account, with a further £250 for children in low income families.
- At age 11 The government are consulting on the possibility of a further voucher at this age.
If vouchers are not invested within one year of issure HM Revenue & Customs will open a stakeholder account on behalf of the child.
[edit] Other funds
Parents and other family members or friends can pay an additional £1,200 a year into their child’s fund, on which any gains or dividends will be tax-free. Stakeholder accounts must accept a minimum contribution of £10 – but they can accept more if they wish.
[edit] Tax treatment
All of the funds in the account are exempt from income tax and capital gains tax, including at maturity.
[edit] Maturity
As the account belongs to the child when they turn 18, the money is theirs to use as they think best.
[edit] Article
- Two days to invest first child vouchers Sunday Times article, 15 January 2006
