Child Trust Funds

Category: Savings
Date: 5/31/2008

What are Child Trust Funds?

• Child Trust Funds (CTF) were started in 2005 for children born after 1 September 2002. The Government provides a voucher which you give to your chosen CTF provider. They will use it to open a tax free savings account for your child.
• You can top up the account up to a maximum of £1,200 each year.
• When the child reaches the age of seven the Government will donate a further £250 to the account, and children in low income families will receive an additional £250
• At 16 the child can begin to make decisions about how the money is managed although no withdrawals are permitted until the child is 18
• Once the child is 18, the Child Trust Fund will close and the funds will be made available to them, alternatively funds may be transferred to an ISA
• The money can be invested in a deposit account or a stock and shares based CTF account.

Who are they Suitable For?

• Every child who receives child benefit is eligible and will receive a voucher.
• If the child's parent or guardian doesn't chose a provider, the Government opens an account in the child's name.

What to Look Out For

• Child Trust Funds are specialised and have restrictions around withdrawal and how much can be funded, so its worth doing your homework on this.
• As with all savings accounts, the rate of interest can vary greatly between providers.

What to do next

Get a feel for the Key Factors to Consider when choosing a savings plan, so you can go in knowing what you're looking for.

Then compare child trust funds to find the best deals around with our best buy tables or product searches.

Moneyfacts.co.uk has also put together a range of savings guides if you are looking around for other types of savings plan.