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Child
Trust Fund (CTF)
This
Government initiative is designed to give every new child in the country a
financial head start when they reach the age of 18. Every child born after
September 1, 2002 will receive at least £250 in vouchers to invest in a
CTF tax-free savings account. Children in lower income families may be
eligible for a further £250 payment. There will also be a government
top-up at the age of seven (the amount has yet to be confirmed). Child
Trust Fund accounts have been available to receive the
Government money and family contributions since April 2005.
Importantly,
family and friends may also contribute to the CTF plan on behalf of the
child - up to £1,200 per year, making it capable of returning a
substantial sum by the time the child reaches 18. For example, a fully
funded scheme that earns 5% net of charges would return around £35,000
after eighteen years*. The investment grows in a tax-free environment and
there is no tax to pay on maturity.
*assumes £250
Govt. payment plus a £100 initial payment, then £100 per month for 18
years growing at 5% p.a. compound. These figures are for illustrative purposes
only. An assessment of your needs will be confirmed before a recommendation can be made. This is only
an example and is not guaranteed – it is not a minimum or maximum
amount. What you will get back depends on how your investment grows. The value of investment is determined by the value of the units, the price of which can fall as well as rise.
The CTF money
becomes available to the child at age 18, and some of the obvious uses
might be:
- funding
further education
- a
deposit on a home
- buying
a car
Parents should
take independent advice in deciding how to invest this money for their
children, and avoid an impulse buy from say, a supermarket (where some
plans will be marketed). There will be many to choose from: the
Children’s Mutual is the first to be confirmed as a provider of this
type of account. Other providers preparing CTF savings products include
Liverpool Victoria, Foreign & Colonial, Abbey, and several
Building Societies and Friendly Societies.
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