Child Trust Fund - A Guide to Child Trust Funds in the UK

Child Trust Funds (CTF)

Child Trust Funds (CTF) were introduced by the Labour Government in April 2005 for UK children born on or after 1st September 2002. They are a long term tax free savings scheme, it was hoped that the scheme would encourage young people to save and plan for their future ie; save for university or maybe even a deposit on a home etc.

To be eligible for the scheme the child must fit the following criteria:

Born after August 2002

Child must reside in the UK

Child benefit must be received for the child

Child must not be subject to immigration control

Once the above criteria is met a voucher is automatically sent by mail to the address which has been registered for the purpose of the Child Benefit.The voucher is to the value of £250, unless the family is recognised as a low income household in which case the child will be issued with two vouchers giving a total sum of £500 to be invested. Where to invest the voucher is entirely up to the parent or care giver of the child, the child tax funds are widely available with numerous providers. It maybe invested into a savings account, stakeholder account or into a stock market fund. Until the child reaches the age of 18 years the fund is locked and no money can be drawn upon.

Child trust funds don't have any impact on any other benefits and aren't required to be listed on any tax returns.

The parent or care giver who invests the voucher on behalf of the child is known as the "registered contact" for the account and will be responsible for keeping all the statements in a safe place, advising of any address changes, investing in a new fund if they feel that the existing one is not performing as expected and saying how the funds should be invested within the fund. This remains the case until the child is 16 years old. Once 16 they are considered old enough to make these decisions for themselves.

It is not just government contributions that can be paid into this fund, friends and family are also able to make payments up to the maximum of £1,200 per year. Further contributions are made by the government when the child reaches their 7th birthday. This is to the value of £250 and is automatically paid into the account shortly after the child turns 7. If the family has been assessed as being on a Low income, a further payment of £250 will be made.