A Gift From the Government...

...if, that is, you are young enough. The Chancellor announced in his April 2003 Budget speech the government’s intention to introduce a ‘Child Trust Fund’ (CTF) for every child born since September 2002.

The CTF will work as follows:

The government will make an initial award of £250. The amount will be higher for children in low income families and a further award will be made when the child reaches age seven (the amount yet to be decided).
Family and friends can add further contributions of up to £1,200 a year to the fund.
Income and capital gains within the fund will be tax-free, but there will be no tax relief for contributions to a CTF account.
The child cannot access the money, including any income or capital gains accumulated until age 18.

Please talk to us if you have any questions on the CTF. The following frequently asked questions and answers may help.

Q: Will I need to make a claim for the CTF award?
A: No. A child will be eligible for a CTF account if Child Benefit has been awarded for them and they are living in the UK. If these conditions are met the CTF is awarded automatically with no need to make a separate application.

Q: I have heard that CTF accounts will not be available until 2005. What happens in the meantime?
A: When CTF accounts become available in 2005, a voucher for £250 will be sent to the Child Benefit claimant. This voucher is then used to open a CTF account with the provider of choice. Vouchers will also be sent to parents of children born between September 2002 and April 2005. These vouchers will have a higher value, recognising that for these children there will be less time for their CTF to grow in value before maturity.

Q: When the CTF accounts are available what form will they take?
A: There will be different sorts of accounts available including cash deposit accounts, unit trusts, life products and a stakeholder CTF account which will be a low-cost equity account.

Q: I have a child born before September 2002. Will I be able to use a CTF account in any way?
A: Unfair though it may seem the answer is apparently not.

Q: What will my child be able to do with the funds when they can access them at age 18?
A: An answer with which some of you may be uncomfortable ……. anything they like!