Childrens Accounts Explained

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  Where can the money be invested?

There are three main types of CTF: stakeholder accounts, cash savings accounts and non-stakeholder accounts.

Stakeholder  CTFs are the Government’s preferred option. It believes that equities will provide better returns than cash over the longer term so stakeholder schemes invest in equities in the early years and are then gradually moved into less risky assets such as cash and bonds as the child nears 18 – this is known as ‘lifestyling’. Annual management charges on stakeholder schemes are capped at 1.5%

Most stakeholder schemes invest in index trackers that are linked to the FTSE 100 or FTSE All Share (although a few invest in actively managed funds).

Stakeholder CTFs are the Government’s preferred option

Non-stakeholder accounts provide a greater choice of underlying investment. However, with a non-stakeholder scheme your child’s vouchers can be invested in any unit trust, open ended investment company, investment trust or exchange traded fund. Some providers only offer a range of funds in their non-stakeholder scheme, so if you have a specific investment fund in mind, you may have to go to one of the stockbrokers that offer CTFs. Click here for more

With a non-stakeholder scheme your child’s vouchers can be invested in any unit trust, open ended investment company, investment trust or exchange traded fund

Cash accounts are lower risk than stakeholder and non-stakeholder CTFs as they do not have any stock market exposure and operate like standard savings accounts. Interest rates tend to be variable and some include introductory bonuses, so you need to watch out for these. Rates do vary so it is worth shopping around. Click here to compare the latest rates.

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