Childrens Accounts Explained
Child
Trust Funds
All children born on or after September 1 2002, are eligible for a child trust fund
(CTF). This is a Government-backed scheme aimed at encouraging parents to save for
their son or daughter’s future.
New-born children receive a voucher from the Government worth at least £250 – those
from families on lower incomes receive £500. They then receive another £250 voucher
at the age of 7 and the Government is currently consulting on whether to give a
further voucher when the child is in secondary school.
In addition to the money from the Government, parents, grandparents and other friends
and family can invest an extra £1,200 a year tax-free
In addition to the money from the Government, parents, grandparents and other friends
and family can invest an extra £1,200 a year tax-free.
Money held within a CTF cannot be accessed until the child reaches the age of 18,
but by that time they could have a healthy nest egg to put towards university costs,
a gap year, their first home or a car.
The amount they receive will be boosted significantly if family members are able
to make use of the £1,200 a year tax-free allowance. If two £250 government vouchers
are invested, the value of the fund will have increased to £1,029 by the time the
child reaches the age of 18. This assumes an annual growth rate of 5%. However,
if the additional £1,200 is invested each year, the fund would be worth more than
£36,000.
Continue to Page 3 to Where can the money be invested? >>
