The Probe - June 2007
Continuing the theme of investing for children, anyone who’s had a child since 1st September 2002 and is eligible for child benefit and resident in the UK, will qualify for a Child Trust Fund (CTF) account and should have received a voucher to invest on their child’s behalf.
The CTF is a government initiative aimed at ensuring that in the future, all children have a financial asset at the start of their adult life.
HM Revenue & Customs will provide a Child Trust Fund voucher worth £250 with which to open the account and children in families receiving the full Child Tax Credit qualify for a further £250 payment (paid directly into the account). The Government will then make a further £250 contribution when the child is aged 7.
There are a variety of different accounts available from a number of providers which include protected cash deposit accounts, and accounts that invest in stocks and shares.
Once money is placed into the CTF, it must remain there until the child is eighteen at which point only the child is able to access it and they are free to spend it as they wish. Children can start to make decisions about how the money is managed when they are 16, which provides them with a valuable opportunity to learn how to start investing for themselves.
There is no tax to pay on income and gains in the account although please note that tax regimes may change.
A maximum of £1,200 each year can be saved in addition in to the account by parents, family or friends. So assuming the two contributions are invested from HMRC and the £100 pm or £1,200 pa investment, the total fund available assuming a net growth rate after charges of 6% would be over £40,000. Not a bad start for an 18 year old!
