What is a Child Trust Fund?
A Child Trust Fund (CTF) is a long-term savings and investment account for children born on or after 1st September 2002. Each child automatically receives a voucher from the government for £250, which their parents can use to open a CTF account. Children who live in low income families are eligible for an additional trust fund payment of £250. The government will then make further payments (of either £250 or £500) on each child’s seventh birthday. This money is then invested for your child and will grow over time.
Getting a CTF will not affect any of the benefits or tax credits that you claim.
How do you apply for a Child Trust Fund?
You don’t have to apply for a Child Trust Fund. Instead you should automatically be sent a £250 CTF voucher once you have claimed Child Benefit.
Which families are eligible for the additional £250 payment?
A child in a low income family is entitled to an additional payment of £250 directly into their CTF account. To qualify the child must live in a household that is entitled to one of the following benefits at the time Child benefit was awarded:
- an income support award which includes payments for that child; or
- an income based job seekers allowance award which includes payments for that child; or
- a child tax credit award where household income for tax credits is below an annual figure (£15,575 for 08/09)
Make sure you claim Child Tax Credits within three months of Child Benefit starting
In order to get an additional payment you must be entitled to the appropriate benefit or tax credit at the date your baby’s Child Benefit started. This means that if you are making a new claim for child tax credit you need to do this within three months – the maximum amount of time a tax credit award can be backdated. Delaying your Child Tax Credit claim by more than three months means you are likely to miss out on the additional CTF payment.
The government intends to change the rules so that an additional CTF payment can be made where the appropriate benefit/tax credit is claimed within 12 months, rather than three months, of a Child Benefit award. However there has been no announcement of when this change will be made.
Some low income families have missed out
The Revenue have identified that around 80,000 low income families have not received additional payments that they should have been automatically paid. They are now in the process of identifying these families and will now ensure that an extra £250 is paid into each affected child’s CTF accounts. These accounts will also receive an extra £20 for each year the payment was delayed.
What happens if I don’t open a CTF account for my child?
Child Trust Fund vouchers are valid for twelve months and if you have not opened an account for your child by the time their voucher expires, the government will automatically open a stakeholder CTF account for them.
Where can I open a CTF account?
There are lots of places where you can open an account including banks, building societies and supermarkets. Some will offer ethical or Shari’a accounts. There are three types of CTF account:
- stakeholder account – the money is invested in company shares but there are measures in place to reduce the risks of losing money if the shares do not do well
- shares account – the money is invested in shares without any measures to reduce the risks
- savings account – this type of account does not invest in shares. Instead it grows through interest being paid on the money in the fund.
Make sure that you ask providers about any fees that they charge for running your child’s CTF account. For further help on choosing a Child Trust Fund account visit the Child Trust Fund website or call the CTF Helpline on Tel: 0845 302 1470 (open daily 8am-8pm).
Increasing the money in your child’s account?
You don’t have to add money to your child’s account but you, your family or your friends have the option of doing so, subject to annual limits.
When will my child get the money in their account?
A child must normally wait until they reach 18 years of age to access the money in their account. However if your child has a terminal illness and is not expected to live for more than six months, you can get early access to buy things that your child needs.
If you need more information
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