Child trust fund

A child trust fund (CTF) is a long-term savings or investment account for children in the United Kingdom. New accounts can no longer be created as of 2011, but existing accounts can receive new money: the accounts were replaced by Junior ISAs.[1][2]

The UK Government introduced the Child Trust Fund with the aim of ensuring that every child has savings by their eighteenth birthday, helping children get into the habit of saving; whilst teaching them the benefits of saving and helping them understand personal finance. The Child Trust Fund scheme was promised in the Labour Party's 2001 general election manifesto[3] and launched in January 2005, with children born on or after 1 September 2002 eligible.[4]

Eligible children received an initial subscription from the government in the form of a voucher for at least £250. In 2010/11, the Child Trust Fund policy was expected to cost around £520m, less than 0.5% of the £84bn UK education budget.[5] Because the scheme allows for family and friends to top up trust funds, it has given a substantial boost to savings rates, particularly among the poor. According to the Children's Mutual, "In terms of changing people's behaviour, this is the most successful product there's ever been."[6] For households with income of £19,000 a year, 30% of the children in that category are having £19 a month saved for them. Part of this is due to grandparents being more willing to contribute to funds, since the money cannot be diverted to the family finances.[6] Creation of new funds and government payments into them were scrapped in January 2011 by the Savings Accounts and Health in Pregnancy Grant Act 2010.

  1. ^ "Child trust fund savings can be moved to Junior Isas". Retrieved 2015-05-29. The schemes were replaced by Junior Isas in November 2011, which across the board offer better interest rates and a far wider selection of investments.
  2. ^ "Child Trust Fund - GOV.UK". www.gov.uk. Retrieved 2015-05-29.
  3. ^ Julian Le Grand, "Implementing Stakeholder Grants: the British Case", in Erik Olin Wright (ed, 2003), Redesigning Distribution: basic income and stakeholder grants as alternative cornerstones for a more egalitarian capitalism, The Real Utopias Project, Volume V
  4. ^ HM Treasury, 10 January 2005, Chancellor and Minister for Children launch Child Trust Fund Archived December 3, 2009, at the Wayback Machine
  5. ^ Cite error: The named reference legr10 was invoked but never defined (see the help page).
  6. ^ a b Zoe Williams, The Guardian, 2 May 2010, Why we cannot afford to raid the child trust fund piggy bank