The first top-ups to the Government’s child trust fund (CTF) scheme will start to be sent out next week, giving additional payments of £250 or £500 to children who are turning seven.
Child Trust Funds were introduced in 2005, with all children born since September 2002 receiving £250 or £500 from the government at birth, which must be invested or deposited in a savings account until they are 18. The first of the CTF generation will turn seven this September and will receive an additional top-up. Most children will receive £250. However, those from low income families will receive £500.
Over 51,000 children were born in September 2002. By this time next year around 600,000 will have qualified for the extra CTF funds, receiving a total of £150m.
The total number of children with CTF accounts reached 4.31 million in March this year. Parents and grandparents can pay additional money into a child’s CTF, and all gains and income accrued in the funds are tax-free. There are three types of CTF – cash, stakeholder shares-based and non-stakeholder shares based. For details of the scheme and a list of CTF providers see the official Child Trust Fund website.
Which? reported on Child Trust Fund providers in May 2009 and found a wide discrepancy in how they had performed. The best funds had grown significantly, with £250 invested in 2006 being worth £307 three years later. The worst had been hit by stockmarket falls however, with £250 reducing to £70 in one example.
Commenting on CTF’s seven year boost, Which? researcher Ian Robinson said, ‘Child Trust Funds have given many children who would otherwise miss out a potentially useful savings opportunity. An extra £250 or £500 will be a welcome addition for the generation of 2002.’
Visit the Which? website to check the rates of interest offered by cash Child Trust Fund providers and see our current Best Buys.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.