What is a Child Trust Fund (CTF)?
A Child Trust Fund (CTF) is a child saving and investment account developed by the Government to encourage children and their families to save for the future.
The Government Child Trust Fund scheme
The Government Child Trust Fund voucher scheme was introduced with the aim of ensuring that all children have a financial head start when they reach adulthood.
Every child born on or after the 1st September 2002 receives a £250 Child Trust Fund voucher from the Government. This amount rises to £500 for children from families who receive full child tax credit. On the child’s 7th birthday, the Government will make a further payment into your child’s Child Trust Fund (CTF) of £250. Again, for families in receipt of full Child Tax Credit this will be £500. This is the current proposal and may change in the future.
There is no need to apply for the Child Trust Fund voucher – entitlement for the CTF is linked directly to your child’s entitlement to child benefit.
Choosing a Provider
The Government will give you a year to invest your Child Trust Fund voucher. If you don’t choose a provider within this time, then the government will automatically invest the voucher for you. Of course, you’ll still be able to transfer to the provider of your choice, but the sooner you open the account, the sooner the money can be invested.
Child Trust Fund accounts – the options
There are two types of Child Trust Fund account – a Stakeholder Child Trust Fund & a Non-Stakeholder CTF. Before investing a Child Trust Fund voucher, it might help to think about your approach to risk and return.
The Government Child Trust Fund rules have set out certain standards relating to Stakeholder Child Trust Fund (see key points of stakeholder accounts and non-stakeholder CTF accounts below). Non-stakeholder Child Trust Fund accounts are not required to meet these standards.
Whichever type of account is chosen, on their 18th birthday the child will have access to it, providing them with a tax-free lump sum to either invest or simply spend as they wish.