|
The ambitious Child Trust Fund (CTF) scheme gives up to £500 in savings to every child born in the UK. It celebrated its first birthday this month, but it's still not much known about. It's worth persevering with though, because CTF is a very tax-efficient way to save for well-off families.
All children born in the UK since September 2002 qualify for the CTF payments. Parents receive a voucher for £250 (or £500 for low-income families) and have a year to choose where to invest it.
Confusingly, there are three types of Child Trust Fund account. The first is a straightfoward savings account with a building society earning interest only (you can expect a rate of around 5 per cent).
The second type is a 'stakeholder' account, in which the money is invested in a 'tracker' fund following the movement of the FTSE 100 or
|
 |
|
 |
| |
All Share index. The money shifts to a savings account when the child is a teenager to stop a stock market crash wiping out profits.
The third 'non-stakeholder' option allows a wide range of stockmarket investments. In this case there's no automatic shift to a savings account and it's left to parents to decide what to do with the money.
Friends and family can 'top up' each child's savings pot to £1,200 per year, and it's all tax-free.
Anyone with a voucher should open a building society CTF account now while they ponder the choices.
Money can be swapped between CTF providers, but can't be withdrawn until the child is 18. The cash will belong to the child - you'll just have to hope he or she blows it on university expenses, rather than expensive habits. 
FIRST POSTED APRIL 20, 2006
 Last week: ISAs save tax and stress? |
