publication date: Sep 15, 2010
author/source: Neil Armitage
Introduced by Labour in 2002, the Child Trust Fund
(CTF) programme saw all UK children
receive a voucher worth £250
(£500 for poorer families), with qualifying seven year olds
receiving an additional £250
. This will shortly be cast aside with the scheme ending in January 2011
But the government savings drive shouldn't spell the end of saving for children
and grandchildren. In fact one of the lessons
learned from the so-called "crunch" is the importance of long-term
finance and saving
So what are the alternative options
? Firstly CTFs
have never been the only tax-efficient savings
option open to children. In the UK, friendly societies
are unique in being able to offer Child Tax Exempt Savings Plans (CTESP)
These plans provide beneficiaries with a final lump sum
exempt from Income or Capital Gains tax
and for forward-thinking families, could provide a crucial financial boost
for a young person desperate for a first car deposit
or to fund studying at university
years from now. Terms and conditions
vary but it's possible for families themselves to determine
the length of the savings term
can be as little as £15 per month
That aside, the financial services industry
is currently considering the future of children's savings
and while many providers, including Foresters Friendly Society
will be launching new alternatives
In the meantime, families are being creative too. Some are even investing money for youngsters in Self-Invested Personal Pensions
(Sipps), a kind of DIY pension plan
which can stay with a child
from birth right until retirement.
Whatever your preference,
there are other simple things to bear in mind when choosing an account
for your newest family members.
Foresters Friendly Society
- Ask yourself whether you'd rather keep the account online only, or stay traditional and opt for a passbook-based offering.
- Find out also if there are any restrictions on how and when money can be withdrawn from the account, and any associated costs.
- Consider also where and how the provider will invest your money. This will depend on your attitude to risk. Our own savings plans, for example, are invested in a with-profits fund, the performance of which guides the amount of bonuses paid into the account each year.
- Tax rules may change and depend on individual circumstances. Inflation
may reduce what can be bought in the future with any plan.
offers a CTESP and still offers support for its CTF customers,
more details of which can be found at www.forestersfriendlysociety.co.uk Foresters Friendly Society
is authorised and regulated by the FSA, FSA registration Number 110029