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Child Trust Funds

Every child is automatically sent a voucher for £250 when they are born.  Parents then invest this on behalf of the child.  Additional money can be paid into the trust fund account, up to a maximum of £1200 per year.  All child trust funds investments are tax free.

An additional £250 is paid directly into the account when the child is seven year old.

Children of lower income families (£14,155 or less in 2006-2007) will receive an extra £250 at birth and again when they reach the age of 7.

All of the money will be in the child’s name and they will be free to spend or invest the money as they chose on their 18th birthday.  The money cannot, however, be accessed until the child reaches 18.

Types of Child Trust Fund

Stakeholder Accounts.  The money is invested in shares.  There are rules in place for stakeholder accounts that aim to minimise the long term risk of the investment.  The charges for running this type of account are limited.

Shares Accounts (non-stakeholder).  The money is invested in shares and other investments.  There are no rules in place to reduce the long term risk or to limit the charges for these accounts.

Savings Accounts (non-stakeholder)  The money is not invested in shares.  The child will get back the money that has been paid into the account plus some interest.

You can change the provider of your child’s trust fund at any time.  However check if there are any exit or start up charges.

Once you have decided which type of account to open, then you need to compare what the different providers offer.  A list of all of the providers will be included in the Child Trust Fund information pack that you will be sent when your child is born.

For more information on these and other benefits go to www.direct.gov.uk