It's free money from the government and an opportunity to look into saving for your child's future. But how does it work? Raisingkids.co.uk attempts to answer your questions.
Who is eligible for the Child Trust Fund (CTF) vouchers?
If your child was born between 1st September 2002 and 5th April 2005 they should have received a Child Trust Fund voucher to open an account with an approved provider sometime between January and May 2005. If your child is born on or after 6th April 2005, you will receive their voucher shortly after Child Benefit has been claimed and awarded for them.
What do I do if I don’t receive my voucher? If your child was born before January 2005 and you haven't received a voucher, then call the CTF Helpline on 0845 302 1470.
How much money will I get? It depends on the date of birth of your child:
Child born between 1 September 2002 and 5 April 2003: £277
Child born between 6 April 2003 and 5 April 2004: £268
Child born between 6 April 2004 and 5 April 2005: £256
Child born from 6 April 2005 onwards: £250
I receive Family Tax Credits. Am I entitled to a top-up sum? Yes. As well as the CTF voucher, children in families with low incomes will get an additional payment of £250 from the Government. This will be paid directly into the accounts of children who live in families receiving Child Tax Credit (CTC), where the household income is not greater than the CTC threshold. (£13,480 in 2004/05 / £13,230 in 2003/04). For more information on whether you qualify go to the official CTF site by clicking here.
Will there be more money when my child reaches 7? Yes, a top-up sum will be put direct into your child’s CTF account but the exact amount has not yet been decided by the government.
What types of accounts are there? There are three main types of account in which you can invest your CTFs:
Savings
This is the basic kind of CTF account and the most secure. You will get back the money you put in, together with any interest. But the downside of this being the most secure account is that, while it pays interest, it's less likely to grow as much as an account that invests in shares. Investing in Shares Account
This account carries more risk than a basic savings account as your money will be invested on your behalf by the bank in stocks and shares and the value of those shares may go down as well as up. But past experience over the last 40 years has shown that money invested in shares over a long period of time usually does better than money invested in a savings account.*
Stakeholder
Stakeholder accounts invest your child’s money in shares in a number of companies when the account is opened but when your child is 13 the money in the account begins to be moved to lower risk investments or assets. This means that although your child’s money may not benefit if the stock market is performing well, it is protected from stock market losses as they approach their 18th birthday. You can put in extra amounts into the account from as little as £10 and the fees for the account have been limited by the government to no more than 1.5% a year – which means the charge can be no more than £1.50 for every £100 in the account. The charges on all other types of CTF account are not limited in this way.
How do I find out which companies offer CTF accounts? Click here to read the full list of approved CTF account providers on the official CTF site.
If I want to invest my money ethically can I do this? Every account provider approved by the government is required to publish details about any policies it may have on social, ethical or environmental investments. You can research this before you decide which provider to choose.
I’ve opened the account, but there’s no money in it. Government money began to go into CTF accounts from April 2005. If you haven't already opened an account you should do it now so it's ready to receive the money as soon as it's available.
Can I use the money in the account myself? Money can't be taken out of the CTF once it has been put in. Once your child is 18 they will be able to decide how to use the money.
Can I put in any more money into the account? Parents, friends and family can put in a total of £1200 a year into the account.
Will this affect any of the benefits or Tax Credits I currently receive? No.
