Child Trust Funds

What is a CTF?

  Also known popularly as Baby Bonds, the Child Trust Fund scheme is a government initiative to encourage savings and investment on behalf of children.

  Under the program, the parents of every child born after 1st September 2002 will be issued with a voucher worth at least £250, rising to double that if the parents are claiming a full tax credit.

  These vouchers can only be invested in special child trust fund (CTF) accounts, which are available from a number of CTF providers such as banks and insurance companies. A second voucher for the same amount will be issued when the child reaches 7 years of age.

  Parents, grandparents, or others can also 'top up' the account with deposits worth up to £1200 a year.

  Any money paid into the account will be 'locked in' until the investment matures when the child reaches 18, at which point the original deposits and earned interest can be withdrawn and used for any purpose - for example, helping finance a university course, a deposit for a house, or buying car.

Stakeholder CTF?

  There are two basic types of CTF account available, Stakeholder and Non-Stakeholder.

  A non-stakeholder account is similar to a standard savings account, in that it pays interest on the balance of the account. With these accounts, there is no risk of losing the money invested.

  Stakeholder accounts, on the other hand, invest the balance in a variety of ways, and must include an element of stockmarket investment.

  Historically, investing in shares has provided a greater return than having the money sat in a savings account, and over the CTF investment period of 18 years this is almost certain to be the case. However, there is always the chance that a market crash or other circumstances could lead to a poor return or even a loss.

More Info

  For more information on Child Trust Funds, visit www.childtrustfund.gov.uk, the official government information site.