Child Trust Funds - What Is A Child Trust Fund & How Does It Work?

A child trust fund is a savings scheme set up by the government which means that any child born after 1 September 2002 that receives child benefit (which is most children) will be given £250 from the government which is to be used to open a child trust fund for them. The way this works is the parent is given a £250 voucher which they can present to any child trust fund provider who can open a child trust fund for them. If for some reason the parent does not use the voucher to set up a child trust fund, then the government will open a child trust fund on behalf of the child.

The child trust fund is tax free and up to £1200 can be put into it each year up until the child reaches 18 years of age. It is not just parents that can put money into the child trust fund, but also grand parents and friends can pay into it as well provided they do not exceed the £1200 a year savings limit.