Choosing the Best Child Trust Fund
Any child who is entitled for child benefit and who was born after September 2002 is entitled to a child trust fund.
Child benefit is an income given for any child who is;
- Under 16 years of age
- Under 19 years of age in full time education
- Aged 16 or 17 years of age and working or training with Connexions or the Career Service
Once the child has been registered for Child Benefit and payments are being received, a CTF voucher will be sent to the parents or caregivers of the child. This voucher can be invested into a variety of schemes;
| Account type |
Details |
Comments |
| Savings |
This is a straight forward savings account where the investment is totally safe but the interest does tend to be low on these types of accounts.
|
This is considered as being a low risk account as all the funds invested into the scheme will remain there and interest will be added. |
| Stock Market Fund |
Funds paid into this type of account are invested into stocks and shares on the stock market. |
Whenever money is invested into the stock market there is a risk that the stocks could drop in value. Although over time the returns could grow significantly. This account is considered to be a high risk due to the inconsistencies to the stock market. There will also be a charge to manage this type of account, costs for CTF are kept to a minimum. |
| Stakeholder Account |
This account starts off as a high risk investment but gradually reduces the risk taking activity over the course of the account. In the early days the money will be invested into stocks and shares which are considered to be of high risk but as the scheme approaches maturity the level of risk taking reduces and so reduces the risk of losing any of the interest which may have built up over the years. |
The risk taking with this account is a combination of the previous two accounts. There are fees attached to stakeholder accounts but these are kept to a minimum they are capped at 1.5%. |
There are numerous companies offering these types of saving schemes for example;
- On-line: This is a great way to compare rates of interest. Make sure that you are comparing like with like so look at the AER (annual equivalent rate) this is the rate that you would achieve if the interest was to accumulate and be paid on the account yearly.
- High street Banks: (Some Banks may have the facility which allows you to manage the account on-line) Most banks will have a financial adviser in store to discuss your requirements.
- High street Building Societies: (Some Building Societies may have the facility which allows you to manage the account on-line) Most of the larger Building societies will have an in store financial adviser to discuss your requirements.
- Large retail outlets: Leaflets displaying the accounts they offer are usually found in store and contain a helpline telephone number or a web address.
- Independent Financial Advisers: If the adviser is independent this means that they will do all the leg work for you and will be able to recommend a suitable scheme to pay into. There may be a fee for their services.
- Insurance Companies: These companies may well have their own financial advisers who can assist but it is important to remember that these advisers can only provide advice on products from the company who they represent.
The Voucher is valid for up to 12 months, if not invested within this time, it will be paid into a default investment account on behalf of the child.
Once you have got an idea of the fund you are likely to use, take a look at our on-line Child Trust Fund Calculator to see just how your child's fund will grow.
A statement is sent to the registered address yearly, this helps the "registered contact" keep a close eye on how the fund is performing. Although funds can not be accessed from a Child Trust Fund account, it is possible to move the funds to a different account type or provider if it is felt that the fund is not performing as well as expected.
Download the Child Trust Fund PDF Guide here - see our other free PDF guides here
Guide Contents
Child Trust Fund (CTF)
Choosing the best Child Trust Fund
Managing a Child Trust Fund
Government changes to the Child Trust Funds
Frequently asked questions
Where to go for further help and information about Child Trust Funds
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