Child Trust Funds - your questions answeredThe Government-introduced Child Trust Fund scheme for all children born after September 1st 2002 and they will receive a voucher for at least £250 to open a fund which will give them a financial nest egg for their future. But what exactly does it all mean? Find the answers to your most commonly asked questions here.
All children born on or after 1st September 2002 as long as they have been awarded child benefit, they live in the UK and are not subject to immigration controls. The only to this are children of Crowned servants - including the Armed Forces - posted abroad and who qualify because they are treated as being in the UK. Over the next couple of months, the Inland Revenue will be sending out vouchers for all eligible children for whom Child Benefit has been claimed. The timings are below:
If your child is born on or after 6th April 2005 you will receive their voucher shortly after you have claimed and been awarded Child Benefit for them. Children will be entitled to a voucher for £250, with children in families with low incomes getting an additional payment from the Government. This will be paid directly into the accounts of children who live in families receiving Child Tax Credit (shortened to CTC), where household income is not greater than the CTC threshold. (£13,480 in 2004/05 / £13,230 in 2003/04). Children born before 6th April will qualify for a slightly larger amount as their Trust Fund will mature sooner. The amounts are as follows:
Providers know that there will be vouchers for different amounts so they will not be surprised to receive vouchers for more than £250. What do I do when I receive the voucher? You will need to decide who will open the CTF account and where.
What type of CTF accounts are there? There are three main types of account; 1. Savings account - A secure investment guaranteeing a return of the initial deposit with some interest. 2. Shares - These invest your child's money by buying shares in companies and almost always produce a better return than savings accounts but share values can fall as well as rise. 3. Stakeholder accounts - these invest in shares in companies but government rules mean the money is invested in a number of companies to reduce the risk of bad performance. Do I have to invest straight away? No, although obviously the sooner you invest the sooner the money will start growing. If you have not invested the money within 12 months the Inland revenue will invest it on your behalf into a stakeholder account. Where can I find out who can provide a CFT account? Your information pack will contain a list of all financial institutions approved as providers for CFTs or alternatively you can visit the Child Trust Fund website Do I have to add to the account? No but according to finance expert Chris Edwards, investing as little as £4 a week would provide around £6000 on your child's 18th birthday at current interest rates. Can anyone else add to the account? Up to £1200 can be added to your child's fund every year by anyone who wants to help it grow, including your child, friends or family. When can the money be withdrawn? The general rule is that no money can be withdrawn from a CTF account until the child holding the account is 18. The exception to this is where the child is terminally ill. The Government wants children who are terminally ill to be able to benefit from the money in their CTF accounts. Once evidence of the terminal illness has been confirmed, the registered contact (the person who manages the CTF account for the child or the child if over 16) will be able to withdraw money from the CTF account. Yes, the registered contact can change providers. Your provider will transfer the CTF account. All you need to do is sign up with a new provider then they will let your old provider know. The new provider will tell the Inland Revenue so that any further Government payments will go into the right account. The new provider will then send you the statements telling you how much money you have in the account.
The money in CTF account will go to whoever inherits the child's estate (any assets belonging to the child). This is usually the child's parents - or the husband or wife if the young person was married. What about children born before September 1st 2002? Children born before 1st September 2002 are not eligible for a CTF account but it is still a good idea to think about saving for these children - or encouraging children themselves to save.
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