Child Trust Fund nears its end; but parents can still invest £1,200 per year

Vouchers were reduced from £250 to £50 from August this year

Vouchers were reduced from £250 to £50 from August this year

As December nears, so does the scrapping of the Child Trust Fund announced in May this year. The month will see the births of the last children eligible for the children’s savings plan.

Earlier this year, Chancellor George Osborne said the Child Trust Fund scheme would be abolished from January 2011, with reductions in voucher payments from August 2010. The Labour scheme, introduced in 2005, entitled every newborn to a £250 voucher and a further payment of £250 at the age of seven. Vouchers would be automatically invested into a tax-free Child Trust Fund account if one had not been opened by the parents within 12 months.

Despite eligibility for Child Trust Funds ending for children born after December 2010, existing accounts will continue to benefit from tax-free investments growths, with the savings protected until the child reaches 18. Friends and family will also be able to make contributions up to £1,200 a year until the fund reaches maturity.

For children born after December 2010 or before the previous Child Trust Fund cut-off date of September 2002, the government has announced the launch of a Junior Individual Savings Account (ISA) by autumn next year.

The Junior ISA will have many of the same features of the Child Trust Fund but will lack any government contribution. Its tax-free nature and (yet undecided) annual cap have led many to call it a “Child Trust Fund in all but name”.

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