Happy Birthday Child Trust Fund Warning

Posted in: Products Last updated: 17 Mar 2006

The Child Trust Fund (CTF) is one year old this April, and Engage Mutual Assurance is marking the milestone with an important birthday message for parents who want to make the most of their child’s annual £1200 tax-exempt CTF savings allowance.

Andrew Haigh from Engage explains - “The tax-exempt CTF allowance runs from child’s birthday to birthday, with each child eligible for a maximum tax-free investment allowance of £1200 per year, or £21,600 over the 18 years that it takes for a Child Trust Fund to mature. Many parents are taking their time to set up a Child Trust Fund, meaning they risk missing out on a full year’s tax free investment allowance if their child’s birthday passes before they get round to investing the voucher.”

“Many people are reminded about their ISA allowance deadlines during April, but parents should remember that investing in the early years of a CTF is also particularly important for ‘tax-maxers’ (those who invest the maximum amount), as contributions will benefit from the longest term potential growth possible. If the current level of investment returns continues, the amount of growth on this annual contribution alone could fund a memorable 18th birthday gift!”

At current standard projections of 5%, 7% and 9%, an investment of £1200 in the first year, plus the two Government payments – £250 at birth and £250 age seven* – would  be worth £2,770, £3,770 and £5,120 respectively after 17 years.

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Mr Haigh added “What Engage has experienced is parents, friends and family members investing larger sums or smaller, regular payments that soon mount up; not realising that they’ve already missed the first year’s allowance by a matter of weeks or even days. In some cases, if families had thought about the child’s allowance and planned when to invest, they could have invested more over the longest period possible. Some families are overlooking between 17 and 18 years of potential growth on what could be up to £1200 – simply by not investing the voucher and making additional investments before the child’s birthday.”

“If other family members and friends are also contributing, they too need to be aware that there is a time limit on each £1200 investment period. A little planning will go a long way to ensuring every child gets the most out of investments made for their future.” he continued.

The message from Engage is simple – the tax exempt CTF allowance runs from the moment your child is born; from birthday to birthday, so don’t overlook this important anniversary.

Engage Mutual Assurance CTF Product Information

The stakeholder CTF is an equity product that initially invests in the Engage Investment Growth Fund

The CTF has built in life styling – once the child reaches age 13, the money is gradually moved from the Engage Investment Growth Fund into less speculative assets (engage High Income Fund – by 20% each year) to lock-in gains as the account reaches maturity. At age 17, 100% of the money is invested in the Engage High Income Fund, although life styling can be switched on or off at anytime and any money transferred into the Engage High Income Fund can be transferred back in to the engage Investment Growth Fund at any time. As this is a stock market based investment, its value can fall as well as rise. The child may not get back all that has been invested for them.

The annual charge is 1.5%

The minimum contribution is £5

The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.

* Payment could be between £250 and £500 depending on family circumstances.