FAQ Child Trust Funds

FAQ Child Trust Funds


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Which Children are eligible?

If your child was born on or after 1st September 2002 then your child is eligible.


How do I open a Child Trust Fund account?

In order to open a Child Trust Fund account you first must be claiming Child Benefit. Child benefit is available to all parents with children independent of their income. Once you have started your Child Benefits you will be sent a Child Trust Fund voucher for £250 which you can then use to open a Child Trust Fund account. Legally your CTF can be opened by a parent or someone who is "parentally responsible". Under the CTF rules this person then becomes known as the "registered contact".


What types of CTF are there?

There are three different types of CTF accounts to choose when you open your Child Trust Fund account:

* Share-based CTF

* Savings CTF

* Stakeholder CTF

We detail the main differences between them below.

Share-based CTF
These types of Child Trust Fund accounts are where the money is invested in stocks and shares. The value of the fund is dependent on how well the shares in the fund do. In a rising Share market the fund increases. Due to the volatility of the Stock Market these types of CTF may generally perform better over a longer period of time.

Savings CTF
A Saving Child Trust Fund account is a very safe way to place and invest your money though over the last 40 years shares have generally outperformed savings accounts over time ( reference ). Essentially this is much like putting your money into a bank's savings account with the exception that any interest earnt is tax free. Your money will grow steadily over time at a fixed interest rate though may not grow as well as a CTF Share or Stakeholder account.

Stakeholder CTF
Stakeholder accounts place your child's money into shares which the government have set certain rules over so to reduce the risks in investing in shares. The money is invested in a variety of shares and not just one to reduce the risks of having all the money in one share.
Once your child is 13 the money is moved to lower risks investments or assests such as cash. The idea is to protect the money closer to the time of the funds maturation.


How much can be contributed?

A maximum of £1,200 can be placed into the account each year (between the child's birthdays).


How much can be earned in a CTF?

The return on investment will be dependant on the type of fund and how well it performs. To calculate how much your chosen CTF can grow by use this Child Trust Fund Caluclator.

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