Child Trust Funds (or how you and the taxman can give your children a financial hand in life…)
So you’d like to put something away for your children; the question is where? The answer is a ‘CTF’ – a Child Trust Fund. A CTF should be somewhere near the top of your list when it comes to saving for children. Anyone – a parent, guardian, relative, or even a friend - can open a CTF on behalf of any child under sixteen years of age. That person manages the fund until the child’s 16th birthday at which time it becomes the child’s responsibilty to manage the fund. But don’t worry - they can’t take any money out of their fund until their age eighteenth birthday! Furthermore, if you have a child or children born on or after September 1 2002, you will by now have received a £250 or £500 voucher, either of which has to be used to open a CTF. In total it’s possible to contribute more than £20,000 to a CTF all of which can be invested in various ways to help the fund grow. Imagine how helpful a relatively substantial lump sum of tax-free cash could be to a young person. On behalf of our customers, we’ve chosen and recommend The Children’s Mutual Friendly Society CTF – a business that specialises in investments for children. Here are the key points of a CTF:
- Anyone can contribute to a CTF on a child’s behalf
- The most that can be contributed to a CTF in any one year is £1,200
- Contributions will be invested various securities including stocks and shares
- CTFs are free of Income Tax and Capital Gains Tax so when the child eventually cashes in the CTF there’ll be no tax to pay
- There are two kinds of CTF – a Stakeholder CTF and a non-stakeholder CTF. In a Stakeholder CTF the management charges are capped at 1.5% a year and all the contributions are invested in stocks and shares.
- A non–stakeholder CTF offers more investment options than a stakeholder CTF. Contributions can be invested in bonds, investment funds and even deposit accounts – the safest option of all, but with less growth potential than other options. The charges for this kind of CTF will be more that the stakeholder CTF, but you have more choice in terms of where contributions can be invested.
- Any child born before 1st September 2002, is not eligible for the £250 Government issue voucher or a CFT account.