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Saving with Child Trust FundsThe Child Trust Fund is a long term tax free way to save for your children. This type of fund is an investment savings account that started when a child was born on or after the first of September 2002. The government gives every eligible child a voucher for £250 to start. It is important to understand how the child trust fund works in order to make the most on the savings. The government starts by issuing the voucher to the child to invest in a special account. The trust fund is not available until the child reaches the age of 18. Parents, family and friends are allowed to access the trust fund in order to place some of their own savings into the account. In one year a maximum of £1,200 can be added by the friends and family. There is no tax to pay on the Child Trust Fund until the child reaches 18. Eligibility must be established before the child will be able to start one of these Child Trust Funds. Any child that was born after or on September 1, 2002 is eligible. To qualify the child must also be living in the UK and qualify for the Child Benefit. A word of caution: If you are seeking asylum your child is not eligible for the Child Trust Fund. As mentioned the government starts all children off with £250 in a voucher form. There are some cases where your child can start with more for the initial beginning of the Child Trust Fund. Any child that is part of a household receiving a child tax credit and an income of £14,495 or below in the year 2007- 2008 will receive an extra £250, for a total of£500. If you qualify for the beginning 500 pounds your child will also get an additional payment of 250 pounds when your child reaches the age of seven. The voucher is issued when you claim the Child Benefit. If you haven’t received a voucher within a month of the starting claim of the Child Benefit, or if you lose the voucher you can speak with the Child Trust Fund employees to have the voucher reissued. You must use the voucher within 12 months of the date shown on the voucher or you will lose the voucher. There are a few types of Child Trust Fund Accounts. You have the accounts where you invest in shares of companies. In this case the child will receive part ownership of the company and the account is linked to the performance of the actual company. You also have stakeholder accounts where the money is invested in a number of companies to reduce the risk. In this case you will find that the companies meet the government standards on low charges. Once the child reaches 13 the money can be moved to a lower risk investment to provide more security for the money as the child approaches 18. If you do not use the voucher before the expiration the HMRC will open an account for your child. Back To Financial News January 2008 Purchasing with Credit Cards |
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