Opening a Child Trust Fund

The Child Trust Fund Voucher

Opening a trust fund account is simple. The parent needs to use the voucher sent to you by the government. You will need to take the voucher to the chosen account provider and they will use this as the first deposit in the Child Trust Fund account. The CTF voucher is send to you once you have applied for Child Benefit. The voucher is very important as you cannot open your Child Trust Fund without it.

When you receive the voucher it is very important to check the child's names and date of birth are correctly displayed on the voucher. You can call the CTF helpline if they are not correct and the government will issue you with a new voucher. Each voucher contains a unique reference number. You should take a photocopy of your Child's voucher and keep it in a safe place in case you need to make any enquires at a later date.

Once you have the voucher the sooner you invest the voucher the quicker it will begin to grow into a trust fund. The voucher contains an expiry date and you do invest the voucher before this date then the government will invest it in a trust for you. If this happens the government will send you details of where they have invested the fund and you can apply to have the fund registered in your name and you can choose to move the account to another provider.

Type of Accounts

There are a large number of different providers of Child Trust providers by the account tend to fall into two main types.

Savings Accounts

One is a straight cash based savings account where the investment will accrue interest on the sums invested at a set interest rate. The account is secure but due to inflation may lose value over time. That will also be costs from the provider from running the account.

Stakeholder Accounts

The difference with Stakeholder Accounts is that the money is invested in stocks and shares. The government have made rules to reduce the risk of this type of account - the investment must be spread across a number of different companies. The stakeholder account is more of a risk that a savings account but the rewards could be higher. The problem is that as the current economic climate shows the value could also plummet if there is an economic downturn.

Once the child reaches the age of 13 the stakeholder account will begin to move a percentage of the investments back into cash. Stakeholder accounts are limited to charging 1.5% a year on the investment. Savings accounts are not restricted in this way. If you fail to use your voucher before it expires then the government will open you a stakeholder account.

Ethical and Shari'a Accounts

Ethical accounts

You can choose to place you investment with a provider that will only invest your child trust fund with ethical companies. If you do not wish your money to be invested in arms, tobacco, alcohol or other types of business you can check the child trust fund providers publicity about social ethical and environmental investments. They are required by law to do this.

Shari'a accounts

Shari'a accounts are based on Islamic values, as defined by the principle of Shari'a law, and will not invest in areas such as alcohol, tobacco and gambling.

Changing Provider

After you have opened your Child Trust Fund account you are free to move it to a different provider of type of account at anytime. There is no charge for this service but if you have a Stakeholder Child Trust Fund and it involves the selling of stocks and shares then these costs can be pasted onto you and deducted from the fund before it is transferred.

Funds changes at 16 and 18

When the child for whom the child trust fund has been provided reaches the age of 16 they can take charge of the management of the fund. They can make choices about who the trust fund provider is, how the money is invested and if it is in an ethical account or not. They cannot however withdraw the money from the Child Trust Fund.

At 18 when the fund matures the money becomes the sole property of the Child for whom the Child Trust Fund was created. They are free to do as they please with the investment.

It is always worth checking out the market to see which Child Trust Fund product matched your needs and requirements best. There a vast number of providers and a little time spent checking for the best child trust fund will be time worth spending.