Child Trust Fund

With Government changes to Child Trust Fund accounts, Scottish Friendly no longer accepts new applications into the Child Trust Fund. If you’re looking for another way to invest for your child’s future why not take a look at our investments for children which includes the Junior ISA.

Information on the Child Trust Fund, including the recent Government changes, has been provided here for your reference only. For more information visit the Government's Child Trust Fund website (opens in new window) or call the Government helpline on 0845 302 1470.

What does the Child Trust Fund offer?

It works like this:

• The Government automatically sends a Child Trust Fund voucher to a new child (born between 1st September 2002 and 2nd January 2011 and receiving Child Benefit)
• You choose where to invest the money on behalf of your child
• You and your family and friends can also add money to the Child Trust Fund - either as a regular amount each month, or in one-off payments - to a maximum of £3,600 per year (once added this money cannot be withdrawn)
• At age 18, your child will receive a lump sum to use however they choose - completely free of tax - no capital gains or income tax under current legislation. Tax treatment depends on their individual circumstances and tax law may change in future.

Babies born on 3rd January 2011 or later, or before 1 September 2002, do not qualify for a CTF account and won't receive CTF payments.

For more information on whether you qualify for a voucher, or if you have lost your voucher, visit the Government's Child Trust Fund website (opens in new window) or call the Government helpline on 0845 302 1470.

The Child Trust Fund: important changes

What are the changes to CTF?

From 1st August 2010, children no longer receive an additional payment from the Government when they reach age 7.

• If your baby was born on or before 1st August 2010 and you successfully claimed Child Benefit by the 1st November 2010, you receive a voucher for £250, and children in lower income families will receive an additional payment of £250.
• If your baby was born on or after 2nd August 2010 up to and including 2nd January 2011 and you successfully claim Child Benefit by 2nd April 2011, you receive a £50 voucher and children in lower income families should receive an additional £50 paid into their account.
• Children born after 2nd January 2011 are no longer be eligible for a CTF and will not receive a voucher from the Government.
• Existing accounts will remain open but will not receive any further government contributions.
• CTF vouchers already issued will continue to be valid until their expiry date.
• From 1 November 2011, the CTF subscription limit is increased to £3,600.
• Also note that vouchers issued on or after 1 January 2012 will have an expiry date of 60 days after the date of issue. After the expiry date, HMRC automatically opens a Revenue Allocated Account for any expired vouchers.

What does this mean for Government payments to Child Trust Fund accounts?

Parents should receive a £250 voucher from the Government to start a Child Trust Fund account for their child if they were born between 1st September 2002 and 1st August 2010. If the child is from a lower income family the Government then pays an additional £250 into the account. The voucher and additional payment will, for children born between 2nd August 2010 and 2nd January 2011, each have a value of £50. Children born after 2nd January 2011 will not qualify for a Child Trust Fund account.

When a child reaches age 7

From 1st August 2010, children will no longer receive an additional payment from the Government when they reach age 7.

Child Trust Fund accounts after January 2011

Children born after 2nd January 2011 are not eligible for a Child Trust Fund. But accounts set up for eligible children will continue to benefit from tax free investment growth and no withdrawals will be possible until the child reaches age 18. The child, friends and family will continue to be able to contribute up to an overall total of £3,600 a year, and it will still be possible to change the type of account and/or move it to another provider.

More information on the changes can be found on the Government's Child Trust Fund website (opens in new window).

How can I invest for other children?

Only children born on or after 1st September 2002 and before 3rd January 2011 are entitled to start up a Child Trust Fund. If you have children who are not eligible, why not take a look at our investments for children which includes the Junior ISA.

No advice has been provided by Scottish Friendly in relation to this plan. If you are in any doubt as to whether this plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.