There will be a further Government payment for the child’s 7th birthday. This amount will be decided nearer the time. Again there will be extra money for children from lower-income families.

How does it work?
Once Child Benefit is awarded the Inland Revenue will automatically send parents a CTF voucher that they can only use to open their child’s account. There is not just one CTF account, people will have to choose from different types of account available from a range of CTF providers, e.g. banks and building societies.

The money in the CTF account cannot be taken out by anyone except the child and they can only withdraw money after their 18th birthday. During the 18 years family, friends and the child can make contributions to the account, up to a total maximum of £1,200 each year. Neither parents nor the child will pay tax on the account.

What do parents need to do?
Parents will not have to do any extra paperwork to claim the Child Trust Fund. Parents of children born after April 2005 will automatically receive an information pack and voucher shortly after they have been awarded Child Benefit. The information pack will explain all about the Child Trust Fund and what they need to do next.

Parents of children born between 1st September 2002 and 5th April 2005 will be sent information packs and vouchers between January and May 2005.

Where can I invest this money?
There are restrictions on this. The government has decided that parents can invest in either a deposit savings account or a stock market based investment. However, there are restrictions on what type of stock market investment can be allowed.

Parents who do not invest this money within a year will have it done for them by the treasury. The treasury has promised that it will have Child Trust funds up and running by April 2005 latest.

Financial projections show that if parents added in their weekly Child Benefit to the fund each week and the fund grew (optimistically) by 7% per annum, this sum would be worth £27,000 after 18 years.

As per any NS&I products any growth achieved by the fund will be tax free but those paying in contributions to the fund will not receive tax relief on their contributions.

You can find comprehensive information about Child Trust Funds at www.childtrustfund.gov.uk or you can call the CTF Helpline on 0845 302 1470.

The information given in this section is not in any way intended to guide you towards any particular product or service. We do not offer information as financial experts or consultants and we would recommend you taking independent financial advice before purchasing any financial services product.

Your views and comments

"I just opened my son's child trust fund with The Children's Mutual and they were fantastic.. I really recommend them. They also have a great interactive leaflet".

Sarah