Child Trust Funds

The Chancellor announced his intention to introduce the Child Trust Fund (CTF) in the April 2003 Budget. The CTF is part of the Government's strategy for saving and asset ownership. The CTF is a savings and investment account for children. The Government will make payments to children through this account to help build up a useful stock of assets for when they reach the age of 18.

The CTF accounts are intended to help strengthen the savings habit of future generations, spread the benefits of assets ownership to all, educate people in the need for savings and give young people a basic understanding of financial products. CTF accounts are available from April 2005 for eligible children born on or after 1st September 2002 .

Child Trust Funds - The Basics

The Child Trust Fund is a savings and investment account set up by the Government, and is for all children living in the UK born on or after 1st September 2002 . The Government will start the account with a gift of £250 and then when the child is seven, the Government will make a further contribution. It is a long-term savings account and the child will not be able to access the money until they reach the age of 18. Neither you nor your child will pay tax on income and gains in the account.

What will I get?

Children born between 1st September 2002 and 5th April 2005 will be receiving their vouchers later in their childhood than children born from 6 April 2005 - meaning they have had less time to save money in their Child Trust Fund accounts. To compensate for this, these children will receive a slightly higher starting payment from the Government.

The Voucher

A Child Trust Fund Account is opened with a voucher. There is one voucher for every child and they are sent out to the child's parents or carers through the post. Each voucher represents the initial £250 contribution from the Government and is the one and only way to open a Child Trust Fund account for a child.

Child Trust Fund and Child Benefit

Before parents or carers can receive the voucher, they must first claim and be awarded Child Benefit. Child Benefit is paid regardless of family income and it goes to parents or carers of all children living in the UK , until the child reaches the age of 16. It is essential to claim and be awarded Child Benefit - otherwise the voucher can't be sent out.

Child Tax Credit

Children who are in families that receive Child Tax Credit and have an annual income at or below the income limit (£13,910 in 2005-06) will be paid a further £250 from the Government - in addition to the starting contribution of £250.