Introduction To Child Trust Funds
Last Updated JANUARY 11TH, 2007
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The Child Trust Fund (CTF) is a new long-term savings and investment account for children. CTF accounts have been available since 6th April 2005 for eligible children born on or after 1st September 2002.
The CTF is part of the Government’s strategy for saving and asset ownership.
The aim of The Child Trust Fund account is to provide an eligible child with a financial head start as a young adult.
It should also help children develop an understanding of personal finance and the importance of saving for their future.
In the modern day it even more important to save for the future of your children.
With the continuing increase in University fees and the struggle to get a first foot on the property ladder some of life's hurdles - having a future fund can assist.
Purpose
The Child Trust Fund (CTF) is a savings and investment account introduced by the present Government to benefit children born on or after 1st September 2002.
Qualifying children receive a £250.00 voucher to start their account. The account belongs to the child and the money it contains cannot be accessed until they reach 18 years of age.
The purpose of the CTF is to ensure that children begin accruing money at an early age to assist them financially at the beginning of their adult life.
The Child Trust Fund (CTF) is a long-term savings and investment account which permits the child (and no one else) to withdraw their money when they reach 18 years of age.
Monetary Contributions
A £250.00 voucher is issued by the present Government to start each child’s account however families receiving Child Tax Credit (CTC), with a household income not greater than the CTC threshold of £14,155 for 2006/07 will receive an extra payment.
A maximum contribution of £1,200 per annum may be made to the account by parents, family or friends.
All contributions made to the CTF must remain within the account until the child reaches 18 years of age at which time they can decide to withdraw their money if desired and for what purpose it should be used. Children can however start to make decisions about how the money is managed when they reach 16 years of age.
The present Government intends to make a further contribution of £250.00 when all eligible children reach 7 years of age with children in lower income families receiving an additional £250. These payments will be made on or around the child's 7th birthday directly into their account.
Types of Account (CTF)
There is more than one type of CTF account enabling parents to choose the type of account they want for their child.
It is currently permissible for parents to move their child’s account to a different CTF provider or change the type of account at any time.
Tax Implications
CTF’s are currently structured in such a way that neither the parents nor the child will pay Tax on either the income or gains in the account.
Benefit implications
CTF’s will not currently affect any benefits or Tax Credits parents receive.
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