For Moms about Money
Child Trust Fund Accounts
Can you remember what did you do with your pocket money when you were a youngster? Well, an impressive 65% of today’s Child Trust Fund kids save some or all of their pocket money according to research by HM Revenue & Customs. The figures show that 5 & 6 year olds – the same children who are benefitting from the extra £250 that the UK Government pay into their Child Trust Fund accounts – have already got the saving habit from a young age.
If your child was born on or after September 1st 2002, they will already have received a £250 voucher to start their Child Trust Fund account. But did you know that they will also receive a second payment of £250 paid directly into their CTF account just after they turn 7? Just like the first payment, the money is invested in the Child Trust Fund account of your choice until your child turns 18 years old. Lower income families are entitled to a further £250 and parents, friends and family can also contribute to a Child Trust Fund account, paying in up to a total of £1,200 extra per year.
So what is a Child Trust Fund?
A Child Trust Fund is a long-term savings and investment account for children in the United Kingdom. Friends & family can contribute up to £1,200 extra per year in total into the account. The funds are held in a trust until the child reaches the age of 18 and cannot be touched before that. Neither the parents nor the child will be taxed on any interest or gains made from the account, and they do not affect entitlement to benefits or tax credits.
What about children whose parents do not open accounts?
The UK Government will open a Stakeholder Child Trust Fund account on behalf of children whose vouchers have expired after 12 months of issue without being used. Parents will still be able to assume responsibility for this account at any time and also change the type of account if they do not think the chosen Stakeholder account is the most appropriate type of account for their child.
I’ve chosen which type of account I want to open but I don’t know which provider to choose.
Some things to think about could be – how would you like to manage your child’s account, you may prefer to speak to someone than email them for instance. Also you may consider whether an ethical Child Trust Fund account is right for you, and how easy it is for friends and family to pay into the CTF account. Shop around and to phone or visit potential providers to get the account that best meets your needs.
What about older children, (those born before 1 September 2002) – what is the Government doing to support them to save?
The Child Trust Fund was introduced in the UK in 2005 and offers new opportunities and new incentives that didn’t exist before. However, outside of the CTF there is already considerable scope for tax-relieved savings for children. A child has a personal tax allowance just like an adult - £6,475 in 2009/10. In addition, many banks & building societies offer savings products especially aimed at children. However, there are special rules which mean that if parents give money or other assets to their child, (outside a Child Trust Fund account), then they may be taxed on their child’s account but only when the resulting income is more than £100 gross per parent per year.
I’d like to change the type of account that my child has (for example from stakeholder to cash or vice versa).
Parents can transfer between account types at any time if they wish to. Your CTF provider will be happy to help.
If your child was born on or after September 1st 2002, they will already have received a £250 voucher to start their Child Trust Fund account. But did you know that they will also receive a second payment of £250 paid directly into their CTF account just after they turn 7? Just like the first payment, the money is invested in the Child Trust Fund account of your choice until your child turns 18 years old. Lower income families are entitled to a further £250 and parents, friends and family can also contribute to a Child Trust Fund account, paying in up to a total of £1,200 extra per year.
So what is a Child Trust Fund?
A Child Trust Fund is a long-term savings and investment account for children in the United Kingdom. Friends & family can contribute up to £1,200 extra per year in total into the account. The funds are held in a trust until the child reaches the age of 18 and cannot be touched before that. Neither the parents nor the child will be taxed on any interest or gains made from the account, and they do not affect entitlement to benefits or tax credits.
What about children whose parents do not open accounts?
The UK Government will open a Stakeholder Child Trust Fund account on behalf of children whose vouchers have expired after 12 months of issue without being used. Parents will still be able to assume responsibility for this account at any time and also change the type of account if they do not think the chosen Stakeholder account is the most appropriate type of account for their child.
I’ve chosen which type of account I want to open but I don’t know which provider to choose.
Some things to think about could be – how would you like to manage your child’s account, you may prefer to speak to someone than email them for instance. Also you may consider whether an ethical Child Trust Fund account is right for you, and how easy it is for friends and family to pay into the CTF account. Shop around and to phone or visit potential providers to get the account that best meets your needs.
What about older children, (those born before 1 September 2002) – what is the Government doing to support them to save?
The Child Trust Fund was introduced in the UK in 2005 and offers new opportunities and new incentives that didn’t exist before. However, outside of the CTF there is already considerable scope for tax-relieved savings for children. A child has a personal tax allowance just like an adult - £6,475 in 2009/10. In addition, many banks & building societies offer savings products especially aimed at children. However, there are special rules which mean that if parents give money or other assets to their child, (outside a Child Trust Fund account), then they may be taxed on their child’s account but only when the resulting income is more than £100 gross per parent per year.
I’d like to change the type of account that my child has (for example from stakeholder to cash or vice versa).
Parents can transfer between account types at any time if they wish to. Your CTF provider will be happy to help.
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