What the Child Trust Fund Can Do for Your Son or Daughter, the Right Way to Invest the Two Hundred and Fifty Pounds
Do you know what the Child Trust Fund is? a small amount seem to have heard of the fact that all newborn children receive a free £250 voucher from the State to invest in a Child Trust Fund. This voucher can be invested in any one of three kinds of CTF account, Stakeholder – a shares-based account thatswaps into cash, a savings account or a shares account. It is an excellent way to prepare for the future needs of a child
Scottish Friendly is an accredited provider of the Child Trust Fund The Government is keen for the general public to have access to Stakeholder accounts and this is the kind of account that we offer. This means that:
Investments are saved into our Managed Growth Fund, which hopes to provide strong growth potential
It invests partly in shares to get the benefit of potentially higher returns over 18 years,compared to a cash deposit account (although the value of shares can
fall 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 percent per year
When reaching 18 the child will get a lump sum, totally free of Capital Gains and Income Tax under current law
It is affordable – additional payments can be put in the account from only £10
A key feature of the Child Trust Fund is that anyone – parents, grandparents, aunts and uncles, friends – if they want can contribute to the Fund to a top limit of £1,200 per year to help boost the child’s Fund (once added, this money is not allowed to be withdrawn).
What this means is that our Stakeholder account offers a good balance between possible high returns and a reduced level of risk. There is also the extra assurance that our account is in accordance with with the Government’s stakeholder criteria. Nonetheless this doesn’t mean that returns are guaranteed or that Stakeholder accounts are suitable for everyone. Bear in mind that the value of shares in the Managed Growth Fund (where your Child Trust Fund money is held) can go down as well as rise and would not be guaranteed.
Only children whose birthday is on or after 1st September 2002 are entitled to open a Child Trust Fund. If you have older kids born before the above-mentioned date who are not eligible you could think about saving for them with a Child Bond – it’s a tax-free savings plan which was created for long-term growth.
The fact is that saving for your son is a sensible means of preparing for the world to come.
