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 Ł250 voucher. Children from low income families receive an extra Ł250 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 Ł250 into their CTF accounts at age 7, with children from lower-income families receiving Ł500.

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 Ł1200 a year.