Introduction to Child Trust Funds
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.
 
Child Trust Funds can be a mine field to navigate though.
Here are ten simple
 
things to know about Child Trust Funds before taking one
out.
 
1. Child Trust Funds are like ISAs but for children. They
are a government backed, tax free saving scheme.
 
2. Parents only receive their child's CTF voucher once he
or she has been registered for Child Benefit. And to do
this, they need to have their birth certificate. Remember,
Child Benefit is available to every child, regardless of
parental income.
 
3. Once you have the voucher, time is money. The sooner you
start to look into the types of CTF account available, the
sooner you can open one. So get reading.
 
4. You can find full details about the scheme at the
government's Child Trust Fund site here
 
5. Children gain full access to their CTF when they turn 18.
 
6. The pre-budget report indicated that you'll be able to
roll a CTF into an ISA, once it matures, meaning that your
child's money could benefit from the tax free status for
many years.
 
7. You can transfer a Child Trust Fund to another provider
at any time, free of charge.
 
8. If you don't invest the voucher within 12 months, the
government will open a stakeholder account for you.
 
9. Parents, friends and relatives can top up a Child Trust
Fund by a maximum of £1,200 per year (£100 per month).
 
10. If your oldest child is eligible for a CTF, and you
were to pay just his/her Child Benefit into the account, it
would equal a contribution of around £907 to the account
per year, or £75 per month. Subsequent children could
contribute £608, or around £50 per month.
 
Another important point to remember is that money invested
in a CTF is not subject to the £100 rule. Normally, if a
child earns any interest over this sum on money given to
him or her by a parent, the parent is taxed on it at their
highest rate. This does not apply to the CTF, meaning that
your child could save the maximum £1,200 per year, whilst
saving elsewhere, too.