History of a Child's Trust Fund

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History of a Child's Trust Fund

The results of research held by the Adult Financial Literacy Advisory Group (AdFlag) in 2001 discovered that three million people in the UK at that time were neither holders of a bank or building society account. Their findings also considered that there was a direct connection between having little money and low levels of literacy, numeracy and language skills. To further exacerbate the problem, the research findings also concluded that I adults with low literacy and numerical skills shy clear of using any form of financial services.

This Catch22 situation meant that their skill levels would be continuously impaired and would cause an ongoing negative impact to manage their finances effectively. In an attempt to counteract this negative trait, and to allow everyone with the chance to begin their adult life with an active bank account, legislation was introduced in the United Kingdom in September 2002, ordering that every child born after that date would be awarded the sum of either £250, or £500 depending on the family's financial circumstances at that time.

The idea was to inspire a long overdue savings boom for parents who wanted to try to do something to ensure their children's future. This clever and compassionate scheme does not allow for the money to be withdrawn till the child reaches the age of eighteen, and also allows for parents or indeed any family member to deposit a sum of up to £1,200 a year till the fund becomes due. In order to take advantage of this grant, which arrives in the form of a non-cashable voucher, the parent's need to deposit the voucher in any one of a series of child trust fund accounts available in any one of the UK's leading banks.

Whilst the original grant bears no interest, any other sums deposited can, and it is the responsibility of the parents or guardians to make sure that the maximum interest be earned without taking too many undue risks. In any event, no taxation is levied on profits earned in a child's trust fund, and any monies deposited cannot be withdrawn until the account matures around the benefactor's eighteenth birthday.

If the child's parents decide not to open an account, they are still unable to take advantage of the voucher for any other reason. In fact after a period of time, the government agency responsible for issuing the voucher and its succesful implementation, will lodge the sum of money set aside for the newly born child in a default account so that the benefactor will be able to enjoy something of their gift when it reaches fruition. When this happens, the parents are notified where the money has been invested and are provided with the option of transferring it to another bank at any time.

In fact parents or guardians can transfer their CTF to another bank at any time they wish up to the child's eighteenth birthday, although when they reach the age of sixteen they can be consulted and have some say on how their money is being managed, After all by that time, if parents have taken this offer seriously there may be around twenty thousand pounds in the account at least, and this may well help the child to gain a further education or something equally worthwhile, Children born before September 2002 are totally ineligible to receive this benefit, however many parents and even grandparents are following the Government's lead and establishing similar accounts at banks who offer these kind of facilities.