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) after each child’s seventh birthday. This money is then invested for your child and will grow over time.
From April 2010 the government will also make extra annual payments into the Child Trust Fund accounts of those children who receive Disability Living Allowance.
Having a CTF for your child 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 for low income families?
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:
- an income support award which includes payments for that child; or
- an income based Job Seeker's 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 (£16,040 for 09/10) or where the child tax credit recipient is also receiving Income Support, income based Job Seeker's Allowance, pension credit or employment and support allowance.
You must have claimed the appropriate benefit before your child trust fund voucher expires.
Who qualifies for the extra payments for disabled children?
Starting from April 2010, the government will make extra payments into the Child Trust Fund accounts of disabled children. In order to qualify for an additional payment your child must have been in receipt of Disability Living Allowance (DLA) at some point during the previous year. The extra payment will be £100 per year, or £200 per year if your child gets the care component of DLA at the highest rate.
The government expects to automatically identify those children who have both DLA and a child trust fund and will make a payment directly into each child’s account. Parents will receive a letter telling them once a payment has been made.
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). Neither you nor your child will pay any tax on income and gains in the account.
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.Contact our free Helpline for further advice.
If you need more information
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