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What the Child Trust Fund can do for your son or daughter
Do you know what the Child Trust Fund is? Only a small number of parents seem to know about the fact that all newborn children get a free £250 voucher from the the State to place in a Child Trust Fund. This voucher may be invested in any one of three types of CTF account, Stakeholder - a shares-based account that switches into cash, a savings account or a shares account. It is a great opportunity to save for the future life of a child. Scottish Friendly is an approved provider of the Child Trust Fund Voucher. The State is eager for the public to have access to Stakeholder accounts and this is the sort of account that we provide. This means that:
• Investments go into Scottish Friendly’s Managed Growth Fund, which hopes to provide good growth potential • It invests in part in shares to take advantage of potentially higher returns over 18 years, compared to a cash deposit account (although the value of shares can go down as well as increase whereas capital would be protected in a deposit account)
• It is available with a low ‘Stakeholder’ funds charge of just 1.5% per year
• When attaining the age of 18 the child will get a lump sum, wholly free of Capital Gains and Income Tax under current legislation
• It’s affordable - extra payments can be put in the account from only £10.
One of the great attractions of the Child Trust Fund is that anyone - parents, grandparents, aunts and uncles, friends - if they want can give to the Fund to an uppermost limit of £1,200 per year to help increase the child’s Fund (once added, this money cannot be withdrawn).
All this means our Stakeholder account provides a good balance between possible high returns and a lower level of risk. There’s also the additional assurance that our account meets with the Government’s stakeholder criteria. Nevertheless this does not mean that returns are assured or that Stakeholder accounts are suitable for everyone. Remember that the value of shares in the Managed Growth Fund (where your Child Trust Fund money is invested) can decrease as well as rise and isn’t guaranteed. Only children born on or after 1st September 2002 are allowed to start up a Child Trust Fund.
If you have older kids who are not eligible you could think about saving for them with a Child Bond - it’s a tax-free savings plan intended for long-term growth. There can be no doubt that investing for your children is a rewarding means of preparing for hard times that may lie ahead.
