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You are here: Saving for Children Guide

Saving for Children Guide


Child Trust Fund

The Government launched the tax-free Child Trust Fund in April 2005 in a bid to encourage more parents to save for their children. Every child born since 1 September 2002 is eligible for a £250 voucher which can be redeemed with a savings or investment institution approved to sell Child Trust Funds. You will receive your voucher automatically once you have registered your new baby for Child Benefit. Children from families on a low income receive £500.

The money must remain invested until the child reaches age 18 at which point it is paid directly to the child. The present Government aims to make a second £250 or £500 payment into the fund when the child reaches age seven. Parents, grandparents or friends can top up the funds up to £1,200 per year.

There are more than 50 approved providers of Child Trust Fund accounts. You have three choices – a cash account, a shares account or a ‘stakeholder’ account. This last one is essentially a shares account which will switch your holdings away from shares and into less risky assets such as bonds and cash as your child approaches the age of 18.

The benefits of the Child Trust Fund are that it is simple in structure and charges in a stakeholder account are capped at 1.5 per cent per year. In addition, there is no tax payable on income or capital gains in the Child Trust Fund. The major disadvantage to the Child Trust Fund is that it is inflexible – you cannot access the money before the child is 18, at which point the child may spend it as he or she wishes.

For a list of providers* and more information about the Child Trust Fund, see, or call the Child Trust Fund helpline on 0845 302 1470.

*Baillie Gifford does not offer a Child Trust Fund.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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