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Child Trust Funds

Last updated: 24 February 2015

Child trust funds (CTFs) are savings accounts for children born between 1 September 2002 and 2 January 2011.

CTFs came with a huge incentive – a cash voucher of up to £250 – from the the government for each child.

Although the government no longer does this, thousands of people in the UK will have active CTFs and if you are one of them, it is important to keep up-to-date with your account to ensure you are maximising the investment opportunities.

Just like junior ISAs, you can save up to £4,000 a year tax-free.

The money you put in into a CTF becomes your child’s and it will be theirs to do as they please when they reach age 18.

Anyone can pay into your child’s CTF, including grandparents, aunties and uncles and so on.

Newborn children can no longer get a CTF, but they can get a junior ISA – although this does not come with the free cash voucher.

At the moment, those that have a CTF are unable to have a junior ISA and it is not possible to transfer your CTF to a junior ISA – but the rules will change from 6 April 2015, allowing CTF holders to switch to junior ISAs instead. This is great news for parents who were stuck with so called ‘zombie’ CTFs, where accounts were subjects to low interest rates, little choice and high charges.

In the meantime, you can switch between CTF providers to ensure you are getting the best deal and service until your child reaches 18.


The types of CTFs

You can either put your money into a cash CTF, a stakeholder CTF, or a shares CTF.


A cash CTF is a tax free savings account and you can pay money into it when you want – just like you would in a high street bank account.

The return on your money is determined by the interest rate the provider gives you, so keep checking you are still getting the best interest rate until your child is 18.

The cash option does mean your money may not grow very fast, but if you do not wish to take high risks with your money, then you may feel comfortable with this option.

The return on your cash depends on the interest rate of the account – you should shop around for the best interest rate, and do not be afraid to switch providers at any time if you find better rates elsewhere.

Mummy Money Matters has researched the market and the table below lists some of the best interest rates available on the market:

Rate % (AER
Furness Building Society
Visit Site
Yorkshire Building Society
Visit Site
Skipton Building Society
Visit Site
Nationwide Building Society
Visit Site
Ipswich Building Society
Visit Site
Shepshed Building Society
Visit Site
Monmouthshire Building Society
Visit Site
Earl Shilton Building Society
Visit Site

*rate includes an introductory bonus for 12 months, after which the interest rate is 2.30%

*Nationwide will pay 1.10% bonus if you pay £240 or more each year

Stakeholder CTF account

This type of CTF invests in stocks and bonds. Whilst your child is still young, the account will invest in higher risk stocks, but as your child reaches 13, the money is then moved to lower risk funds. This is known as the ‘lifestyling’ approach.
Stakeholder CTFs must invest in shares and bonds of a number of companies to best protect your child’s money. This ensures that the money is well diversified, not all in one basket, and there is less risk should one company do badly.
Stakeholder accounts have a maximum 1.5% annual management charge – that’s £1.50 for every £100 you have in the account every year.
If you did not use your CTF voucher by its expiry date, the government will have put it into this type of account for you.

Shares CTFs

This type of account invests in shares and bonds in companies. This is considered a riskier approach as the return on your investment depends on the performance of the companies your CTF is investing in.
If the stocks and shares do badly, you could lose all or some of your investments, but if they perform well, you can expect some high returns on your investments.
This can be a good option for long-term investing.
Historically, data shows that returns from these types of investments can produce better returns.
Some providers will offer Shariah (Islamic) or ethical funds.
Unlike the stakeholder fund, which has strict government guidelines, charges can be higher and they do not use the ‘lifestyling’ approach.
You should discuss your options in detail with the provider.

Here is MMM’s list of some providers for stakeholder and shares CTFs:

Provider Ethical Option Shariah Option Type of Account
The Children’s Mutual Yes Yes Stakeholder and shares Visit Site
Family Investments Yes No Stakeholder and shares Visit Site
Foresters Friendly Society Yes No Stakeholder and shares Visit Site
Healthy Investments Yes No Stakeholder and shares Visit Site


If you are interested in a full list of UK CTF providers, click here.

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Keep up with MMM on Twitter @MumMoneyMatters and Facebook !


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