A head start in life…. from the Government
Children that were born and are resident in the UK since 1st September 2002, will qualify for a Child Trust Fund (CTF) account, provided they are eligible for child benefit.
The CTF is a government initiative aimed at ensuring that in the future, all children have a financial asset at the start of their adult life.
Her Majesty Revenue & Customs (HMRC) will provide a CTF voucher worth £250.00 with which to open the account, and children in families receiving the full Child Tax Credit qualify for a further £250.00 payment, which is paid directly into the account. When the child reaches age 7, the Government will make a further contribution of £250.00.
There are a variety of different accounts available from a number of providers, which include protected cash deposit accounts, to accounts that invest in stocks and shares.
Once money is placed into the CTF, it must remain there until the child is eighteen years old, at which point only the child is able to access it.
This allows children to start making financial decisions about how they spend their money, which provides them with a valuable opportunity to learn how to start investing, and in turn provides a level of independence for the future.
There is no tax to pay on income and gains in the account at this time. However, please note that tax regimes may change.
In additional to the HMRC vouchers, family or friends can invest up to a maximum of £1,200.00 per annum. So assuming an annual growth rate of 6%, along with the two £250.00 contributions from HMRC and £100.00 per month or £1,200.00 per annum from family or friends, the total fund value will be worth over £40,000.00. Now that's a nice head start for the kids!
The above figures are for illustrative purposes only and may vary considerably from reality and should not be relied upon as an accurate reflection of future returns. As with all investments, the value can go up or down and there is no guarantee to future returns.