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The Child Trust Fund

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In the April 2003 Budget, the Chancellor of the Exchequer announced  the introduction of the Child Trust Fund (CTF).

The CTF is a savings and investment account for children.

Children born on or after 1 September 2002 are eligible provided they live in the UK and child benefit has been awarded for them.

There is no need for parents to claim the CTF. Once a child benefit award has been made and eligibility for the CTF accepted, an initial payment in the form of a voucher worth £250 will be sent in the post to the parent or carer. The voucher can then be used to open a CTF account for that child.

An additional £250 will be paid to children in families eligible for full Child Tax Credit (CTC) with household income at or below the CTC income threshold (£15,575 for 2008/09).

The Government has also promised to make another payment  of £250 to children on their seventh birthday.

The money must be invested in a CTF and cannot be accessed until the child is 18 years old. The money belongs to the child, although it is managed by a person with parental responsibility until the child is 16. Children over 16 will manage their own CTF accounts.

Parents, family and friends will be able to contribute up to a total of £1,200 a year to a CTF account. Income arising on a CTF account is exempt from tax.

The Government hopes that the scheme will encourage saving and that the money will ultimately be used to help with further education costs or towards the purchase of a home. However, there will be no restriction on how the money in the CTF account is used. 

If an account is not opened before the initial voucher expires (usually 12 months from issue) the Inland Revenue will open a stakeholder CTF account on the child’s behalf.

The CTF account and the income and gains from that account do not affect family benefit and tax credits during the time the CTF account is open.

Information is also available  in nine languages on the CTF website.