This Easter make the most of the Child Trust Fund and help build a nest egg far sweeter than any chocolate
Despite the Government’s decision to stop creating any new Child Trust Funds from the start of this year, over 5 million British children born between September 2002 and January 2011 hold one of these valuable assets. Friends and family of these children have a valuable opportunity to add to their future funds as well as to their Easter baskets this holiday season.
Each child’s fund can currently have £1,200 per year added to it. This money will be invested tax efficiently for the child’s use upon maturity at age 18 – perhaps to help with the costs of further education or training.
Andy Brown, Sales & Marketing Director of The Children’s Mutual: ‘In these times of challenging austerity, we have found that families are looking more and more at the importance of saving now for the costs that will face their children in the future. Indeed the average direct debit payment made by parents into CTFs held with The Children’s Mutual has increased in recent months to £27 – if this amount were paid monthly throughout the life of the account, it could result in a lump sum of over £10,000 upon maturity after 18 years[1] However, anyone can add to a child’s CTF so grandparents, aunts and uncles, godparents and friends can all work together to provide a helping hand when today’s little one becomes a young adult in the years to come. Even a single annual payment of £100 could mean an extra £3,000 at age 18[2] if made regularly throughout the child’s life. If several family members were able to work together over the long term to make the current maximum contribution of £100 a month this could result in a fund worth £37,100[3] upon maturity. These are significant sums that could be of real practical assistance over many Easters to come.’
In addition, the Government has recently announced its intention to increase the annual top-up limit for Child Trust Funds to £3,000. The timing of this has not yet been confirmed but if a four year old account has been receiving the maximum annual contributions from the start and continues to do so at the new £3,000 level up to maturity at 18 years, this could result in a maturing fund worth £74,000[4].
[1] £10,300 Based on contributions of £27 per month. This future projected value is based on money being invested every month, together with the Government’s initial £250 voucher, for 18 years in a Stakeholder Child Trust Fund Account. We’re assuming an investment return of 7% a year, and charges of 1.5% of the CTF account value each year. The projected values aren’t guaranteed because the value of shares goes up and down. So the final payout could be more or less than this. This figure rises to £10,800 if an account also received the government’s £250 Age 7 payment or reduces to £9,740 if no Government money were received by the account at any time.
[2] Future projected value based on investing £100 a year for 18 years in a stakeholder CTF account. We’re assuming an investment return of 7% a year, and charges of 1.5% of the CTF account value each year. The projected value isn’t guaranteed because the value of shares goes up and down. So the final payout could be more or less than this.
[3] £37,100 Based on contributions of £100 per month. This future projected value is based on money being invested every month, together with the Government’s initial £250 voucher, for 18 years in a Stakeholder Child Trust Fund Account. We’re assuming an investment return of 7% a year, and charges of 1.5% of the CTF account value each year. The projected values aren’t guaranteed because the value of shares goes up and down. So the final payout could be more or less than this.
[4] £74,000 Based on 4 years of contributions of £100 per month (plus the Government’s initial £250 voucher) then 14 years with contributions of £250 per month. This future projected value is based on money being invested every month for 18 years in a Stakeholder Child Trust Fund Account. We’re assuming an investment return of 7% a year, and charges of 1.5% of the CTF account value each year. The projected values aren’t guaranteed because the value of shares goes up and down. So the final payout could be more or less than this.
