The Child Trust Fund (CTF) is a long-term tax-free savings and investment account for all children born in the UK.
How the Child Trust Fund worksEvery eligible child is given a voucher worth at least £250 by the government. This voucher is used to invest in an account which can be accessed by your child when they reach the age of 18. Parents, family and friends can pay up to £1,200 into the account each year. The money in the account is not taxed and nor are any profits it makes until your child is 18 years old.
Who is eligible?To be eligible for the Child Trust Fund you must be living in the UK and be claiming child benefits. Only children born on or after 1st September 2002 qualify.
If you are an asylum seeker waiting for your asylum claim to be processed your child will not be eligible for a Child Trust Fund.
How much your child will get?The government will send you a CTF voucher worth a minimum of £250 to set up your child's account.
If you live in a household getting Child Tax Credit, with an income at or below £14,155 (tax year 2006 - 2007), your child will receive a £500 voucher.
When your child reaches seven years old you will receive an additional payment of £250 (or £500 if you are on a low income).
Issue of the CTF voucherTo qualify for a voucher you have to be claiming Child Benefit for your child.
If you haven't received a voucher within a month of starting to claim Child Benefit, or if you lose the one you have, call the UK CTF helpline on 0845 302 1470 or textphone on 0845 366 7870 (8.00 am to 8.00 pm seven days a week).
If you haven't opened a Child Trust Fund account within 12 months of the date shown on the voucher, the government will open an account for your child.
Types of Child Trust Fund accountsThere are three types of account:
 Shareholder accounts where you your child's money is invested by buying shares in companies, so the value of your account is linked to how the company performs. You must remember that the value of shares can go down as well as up.
Stakeholder accounts where your child's money is invested in a number of companies in order to reduce the risk. Once your child is 13, this money is moved to lower-risk investments, so your child's money is safer as they approach 18.
Savings accounts where the money is kept in a safe place but its value remains more or less the same. The interest paid only makes up for inflation so the 'buying power' of your child's money stays the same.
Opening a Child Trust Fund accountYou can open a Child Trust Fund account:
At banks, building societies or friendly societies
With fund managers, insurance companies or investment trusts
Through local high street shops (working in partnership with providers to make CTF accounts easily available).
Before you open a Child Trust Fund account it's a good idea to research into the different accounts available before deciding on the most suitable one for your child.
Managing the accountThe CTF account will be in the child's name, but whoever opened it is responsible for managing it. It is their job to let the relevant people know if there is a change of address or any other contact details, keep account statements safe, and change the account or provider according to the child's needs.
Once they reach 18, your child will take responsibility of their account and they can access the money in it.
Adding money to the account
Every year, family members and friends can add up to £1,200 to the account. The year runs from your child's birthday in one year to their next birthday.
How the account is taxed
The Child Trust Fund is tax-free until your child is 18. No tax has to be paid on income or gains in the account. Once they reach 18 the fund will be taxed in the normal way.
June 2008 | 
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