Child Trust Fund

updated: January 21, 2010

Child Trust Funds (CTFs) were introduced by the Government with effect from 6 April 2005 to help parents save for their children.

Parents who qualify will receive a voucher for £250 (or in some cases £500) issued in the child’s name which is to be invested in a Government approved tax-free savings fund. The fund can be invested in cash (ie deposit accounts), bonds (ie fixed interest investments) and equities (ie stockmarket linked investments) over an 18 year period.

Once the child reaches his or her 18th birthday the money can be used by them for any purpose.

Around two million parents with children born on or after 1 September 2002 qualified to receive a voucher at the outset, provided that child benefit had been awarded to them and they lived in the UK.  A further 700,000 children now benefit every year.

By providing children with a small amount of capital, a basic understanding of financial products, and some control over their own finances, the Government hopes to encourage future generations to save wisely. 

Unfortunately the majority of parents will simply ‘invest’ the money in a deposit account, which is the most unsuitable type of investment for anyone for an 18 year investment period.  The real value of such an investment will be heavily undermined by inflation and will not assist in furthering their child’s understanding of financial products

To obtain further information please click here for our pdf Guide to Child Trust Funds .