The
Child Trust Fund (CTF) allows you to save up to £1,200 a year for your child tax-free. All the interest or capital gain earned by the money in the CTF will be free of savings income tax or capital gains tax.
Additionally the government sends all parents of new born children a £250 voucher that can only be invested in a Child Trust Fund account. Parents on lower incomes may be eligible to receive a £500 voucher.
When your child reaches seven years old you will receive another £250 or £500 voucher to invest in your child’s CTF. The money placed in a
Child Trust Fund can only be accessed by the child it was intended for when he or she is 18 years old, however it passes into your child’s control at the age of 16.
There are a variety of different types of Child Trust Fund available. Deciding which CTF is right for you depends on your attitude to risk. Our Child Trust Fund comparison table only includes self-select stocks and shares CTFs as we believe that putting money into a cash deposit CTF will restrict the growth of your child’s fund too much.
In the last one hundred years the stock market outperformed cash in over 99% of eighteen-year time periods. The range of investment
child trust funds is also fairly wide.
You can pick the investments yourself, choosing from stocks and shares, Exchange Traded Funds or unit and investment trusts, or you choose from a range of hose funds offered by your provider, or you can allow your provider to make the choice for you.
There is also another option available: lifestyling. Lifestyling is when your CTF provider automatically moves your child’s fund into cash when he or she is 16 years old. This is to prevent a sudden fall in the stock market near the end of the
Child Trust Fund term from wiping out too much of the value of the fund.
This should be considered if you do not wish to actively manage your child's fund.
