INFORM
INVESTING
IN THE LOOP
IN FUTURES
Louise Jarvill, tax specialist, explains Child Trust
Funds - an easy way to give children a
kick-start in life
As part of a new government campaign, How do I set up a Child Trust Fund?
teenagers and young adults will soon be a71 If you have registered to receive child benefit and
taught essential money management skills.
your child was born on or after 1 September
This comes following recent research by
2002 you should receive a CTF voucher worth
the Personal Finance Education Group
£250 automatically.
(PFEG) that found 9 in 10 teenagers say
a71
The voucher expires after a year, at which time
they worry about money and spending
HMRC will open a stakeholder account on the
and 66% think about money everyday.
child’s behalf.
a71
Choose from one of three types of account;
Naturally, parents want to help give their children the
savings, investment or stakeholder. Different
skills they need to manage their personal finances.
accounts will suit people’s different attitudes
They may also want to set aside some money that
towards risk verses reward.
can be used to fund driving lessons, gap years or even
a kick-start to help saving for more adult purchases a71 At the age of seven, a further £250 will be paid
such their first house. The Child Trust Fund (CTF) is into the account by the government.
just one method of achieving these aims.
How do I choose my Child Trust Fund account?
What is a Child Trust Fund?
It’s a good idea to look at a number of CTF accounts
a71
The CTF is a government initiative to encourage
before deciding where to open your child’s account.
parents to set up a saving plan for their children.
Consider what fees there may be for running the
a71
The account will be in your child’s name and only
account and the likely return on your investments.
your child can access it. Your child will only be
able to withdraw the money when they turn 18.
a71
Savings accounts: your money is secure and
The money cannot be taken out of the account
interest is earned on the value of your account.
until this time.
a71
Investment accounts: your child’s money is
invested in shares which means the value of youra71
At the age 16, your child is able to take over the
management of their CTF.
account may go up or down. There is usually a
charge for these types of accounts depending on
a71
The government contributes a minimum of £500
the value held in them.
to your CTF with greater contributions being
made for lower income families.
a71
Stakeholder accounts: your child’s money is
At any time you can move the account to a different
invested in shares but certain rules set by the
provider or change the type of account.
a71
Neither you nor your child will pay tax on any
government need to be followed for these
income or gains arising from the account.
In order to decide the best account and provider for
accounts. These rules aim to reduce the risk of
your child’s CTF, the Child Trust Fund website has an
investing in shares.
a71
Each year you can contribute a maximum of account chooser tool. For general information, the
£1,200 to the account. Financial Services Authority is also a helpful resource.
LINKS
Statistics
The Child Trust Fund website:
a71 Since the initiative’s conception, just 75% of the issued vouchers have been used by parents to
www.childtrustfund.gov.uk
open a CTF for their child.
The Investment Management Association’s Guide
a71 Based on a savings CTF account with an interest rate of 3.5%, and assuming the maximum
for CTF: www.investmentuk.org/FactSheets/CTF
contribution is made annually, the CTF could be worth £28,550.00* by the time your child
Financial Services Authority:
reaches age 18.
www.moneymadeclear.fsa.gov.uk
*Calculated using the CTF calculator: www.childtrustfund.gov.uk/templates/Calculator_1250.aspx
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