Child Trust Fund: A Comprehensive Guide for Parents

The Child Trust Fund is a savings account created by the government to help children grow their money over time.

It was introduced in 2002 and was initially a tax-free savings account for newborn babies.

The fund was meant to be a nest egg for children to use when they turned 18.

Parents and guardians can add money to the account, and the government also contributes a lump sum, known as the Child Trust Fund payment.

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A Child Trust Fund is a type of savings account designed to help children grow their money over time.

In the UK, the government used to add a lump sum to every child's trust fund, but this stopped in 2011.

The amount added to a child's trust fund was tax-free and could be used for their education, training, or even a down payment on a house.

Children born on or after September 1, 2002, were eligible for a government contribution to their trust fund.

The government contribution was £250 for children born between September 2002 and January 2011, and £500 for those born between January 2011 and January 2017.

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A Child Trust Fund is a long-term savings account introduced by the Government for children born between 2002 and 2011. You can transfer a CTF to Foresters and contribute to it until the child's 18th birthday.

Contributions can be made from as little as £10 up to £9,000 each year, and friends and family can contribute too. This helps build up the child's savings pot over time.

Most advisers recommend equity-based CTFs, which invest in shares with a set of rules to reduce financial risk. These include provision for money in the account to be gradually moved to lower risk investments when the child reaches age 13.

Here are some common types of CTF investments:

Tax-free interest is added to the account on the child's birthday, and this interest does not count towards any annual allowances.

A Child Trust Fund is a long-term savings account introduced by the Government for children born between 1st September 2002 and 2nd January 2011.

You can transfer a Child Trust Fund to a new provider, such as Foresters, and contribute to it until the child is 18 years old.

The account can be funded with up to £9,000 each year, and friends and family can contribute too – helping to build up your child's savings pot.

Here are some ways to contribute to a Child Trust Fund:

Most advisers recommend equity-based Child Trust Funds, which invest in shares and are designed to reduce financial risk over the long term.

Stakeholder accounts, in particular, invest in shares with a set of rules to reduce risk, such as gradually moving funds to lower-risk investments when the child reaches age 13.

The charge on a stakeholder account is limited to no more than 1.5 per cent a year, which is lower than other types of CTF accounts.

You can pay into a Nationwide Child Trust Fund in branch or using the Internet Bank, and up to £9,000 can be paid in each year – starting on your child's birthday and ending the day before their next one.

All payments made into the account can't be taken out until the child's 18th birthday, and only the child will have access to the money at that time.

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Setting the wrong goals can be a major setback for your financial planning. Most young adults aren't responsible with money.

You get to decide what the money can be used for before the age of maturity when you're setting up the trust. Hospital bills are a common reason to withdraw money.

Education is another common reason to access the trust funds. Weddings are also a common reason for withdrawing money.

You can set the trust up so the money for other types of expenditures can’t be retrieved until a certain age is reached.

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To be eligible for a Child Trust Fund (CTF), your child must have been born on or after 1 September 2002.

You'll need to have received child benefit for your child, and they must be living in the United Kingdom. Additionally, your child cannot be subject to immigration controls.

The children of Crown servants posted abroad, including those in the Armed Forces, qualify for a CTF because they are treated as being in the UK.

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To be eligible for the Child Trust Fund (CTF), you need to meet certain criteria. A child born on or after September 1, 2002, is eligible as long as their parents have received child benefit for them.

You must also be living in the United Kingdom. This is a requirement for eligibility.

The children of Crown servants posted abroad, including those in the Armed Forces, qualify for the CTF. This is because they are treated as being in the UK, despite being abroad.

Here are the specific eligibility requirements summarized:

As you approach your 18th birthday, you'll be contacted by the account provider, and your Child Trust Fund will be moved to a 1 year ISA Holding Account. This account is a temporary home for your savings until you decide what to do with the money.

You'll need to confirm your identity to withdraw the money or transfer it to a different account. This is a standard security measure to ensure your funds are safe.

Once you turn 18, you can withdraw money from the account. However, you won't be able to pay any more money into the account, as it's designed to be a temporary holding place.

Your account will be written to you a few weeks before your 18th birthday, reminding you to confirm your identity and take control of your savings.

Trust fund babies are often misunderstood, but the reality is that trust funds are typically established to provide a source of income and assets for a child in case their parents are no longer around to provide for them.

A trust fund is not meant to give a child an excessive amount of cash to spend on material possessions.

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At birth, the government gave every eligible child a voucher worth £250 to open the account. This voucher was meant to kick-start the child's savings journey.

In addition to the initial voucher, children from low-income families received a further £250 directly into their accounts. This extra support was aimed at helping families who may not have had the means to invest otherwise.

The government also planned to make an additional payment of £250 into the account at age 7, with a further £250 for children in low-income families. This payment was intended to help families continue to build their child's savings over time.

If vouchers weren't invested within one year of issue, HM Revenue and Customs would open a stakeholder account on behalf of the child. Unfortunately, this happened to 30% of accounts, and it's a good idea to make sure you take action on those vouchers as soon as possible.

There's a significant correlation between HMRC-allocated accounts and low-income families, which highlights the importance of targeted support for these families.

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Tax-free interest is added to the account on your child's birthday, and it's not subject to personal income tax. This means you won't have to worry about paying taxes on the interest earned.

You can view the fund performance and get more information about the investment by logging in to MyPlansWhere.

The Child Trust Fund is invested, but the exact details can be found by logging in to MyPlansWhere.

Up to £9,000 can be paid into the account each year, starting on your child's birthday and ending the day before their next one.

You can view the performance of your Child Trust Fund by logging into MyPlans, where you'll find information about the fund and its current status.

To see how your Child Trust Fund is performing, you'll need to log into MyPlans.

The fund's performance can be viewed online, but you'll need to have an account to access this information.

You can find out where your Child Trust Fund is invested by logging into MyPlans.

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Interest is added to the account on your child's birthday, and it doesn't count towards any annual allowances.

This interest is tax-free, which means you won't have to pay income tax on it.

As the account is owned by the child, no further income tax needs to be paid on the interest.