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Child Trust Funds reach fifth birthday

£5m invested in CTFs each day, research says

6 April 2010 marks the fifth birthday of Child Trust Funds (CTFs), first introduced by the government in 2005 to encourage long-term saving.

Child Trust Funds are specialist savings accounts for children which are topped up with government money, and are accessible only when the holder reaches his or her eighteenth birthday. CTF savings can prove invaluable to young people as they enter adult life; they can be used to purchase a car, part-fund higher education or be used to help put a first foot on the property ladder.

Today, according to Child Trust Fund provider The Children’s Mutual, over £700,000 a day – equating to £5m a week – is being invested in CTFs.

Child Trust Fund popularity

The Children’s Mutual suggests that, currently, 1.4m parents, family members and friends are contributing to CTFs. Each month, more than £22m is added to accounts.

Nearly three quarters of parents choose to proactively open their child’s CTF, according to the mutual – which it claims indicates a higher level of consumer engagement with CTFs than with pensions or Isas.

The average direct debit payment made by people into its CTFs is £24, The Children’s Mutual says. If this amount were paid in monthly throughout the life of an account, it could result in a lump sum of £9,750 upon reaching maturity.

Child Trust Fund changes

April 2010 marks the beginning of additional government payments into CTFs for disabled children who are entitled to Disability Living Allowance. These additional yearly payments of £100 or £200 for severely disabled children could mean account holders have an extra £3,000 or £6,000 when they reach 18.

David White, Chief Executive of The Children’s Mutual, said: ‘The introduction of additional payments for disabled children is crucial as it reflects the additional costs that disabled young adults and their families may face.’

Choosing a Child Trust Fund

Which? Child Trust Fund expert Ian Robinson said: ‘Child Trust Funds are available to all children born after 1 September 2002 – and the offer is well worth taking up. Not only does opening a CTF mean your child will receive a lump sum from the government to help start their savings pot; CTFs also have tax-free benefits in the same way as Isas.

‘However, there are several different types of CTF available – and it is up to individual parents to assess the advantages and disadvantages of each. For help with choosing a CTF, read the Which? Child Trust Funds explained advice guide.

‘Also, don’t forget to regularly check the return your child is earning in his or her CTF. If you’re not happy with the way your Child Trust Fund is performing, look at the alternatives and consider switching. The Which? Child Trust Funds review could help you pick a market-leading CTF.’

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