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Savings & Investments glossary

Child trust fund

A child trust fund is a government savings scheme for children.

Under the child trust fund scheme, every child born after September 1st 2002 has been sent a £250 lump sum to invest or deposit in a bank account, with those born to parents on low incomes receiving an additional £250.

On the child's seventh birthday they receive a second voucher worth £250 or £500.

Parents, relatives and friends can then put an extra £1,200 a year into the fund, which earns interest tax-free and becomes available to the child on their 18th birthday.

If parents do not invest the voucher within a year, the government invests it on the child's behalf - removing any prospect of choice from the parents.

There are three sorts of child trust fund accounts:
  • stakeholder accounts – these allow parents to invest in shares on their child's behalf, with rules to minimise risk.
  • shares accounts – these have potential for higher growth but with higher risk than stakeholder accounts.
  • cash savings accounts – these offer the least growth potential but with almost no risk.


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