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Choosing a Child Trust Fund
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The Child Trust Fund, a government-savings scheme which gives parents £250 vouchers to invest on their children's behalf, is open for business on 6 April.
Many parents - who are entrusted with investing the funds until their children reach 16 - may be struggling to know where they should invest.
Here is a guide to the scheme and what to look out for.
What's it all about?
The Child Trust Fund is a government-savings initiative, aimed at encouraging children to save and to help them get a "better start in life".
The money cannot be accessed until the child reaches 18, although at the age of 16, the child will take over the responsibility for managing the account themselves.
Every child born in the UK on or after 1 September 2002 will get at least £250 as a starting voucher. Families on low incomes should receive an additional £250.
Children born between 1 September 2002 and 5 April 2005 will get slightly more to take into account the fact that Child Trust Fund accounts are only available from April 2005.
The government will also top up accounts on the child's seventh birthday. Plans for another payment when children turn eleven are currently being discussed.
Can I invest more?
Yes. Every fund may also be topped up by families or friends, up to a maximum limit of £1,200 a year.
There will be no income tax or capital gains tax to pay on the account.
What do I do with my voucher?
Two million vouchers have been issued since mid-January to parents of children born after 1 September 2002.
This will be followed each month by the issue of 60,000 vouchers, one for each new-born baby.
Parents can't spend the money or pay it into an ordinary savings or investment account. It must be invested by parents into a Child Trust Fund, run by an authorised Child Trust Fund provider.
Parents' right to choose a provider expires one year after the voucher has been issued. At that point the Inland Revenue will pick a fund.
Parents who haven't received a voucher should contact the Child Trust Fund helpline (details on right). All parents have to do to get a voucher is claim Child Benefit.
But there are so many providers, how do I choose?
The Child Trust Fund is a very simple savings concept, but choosing the most suitable home for your voucher may prove taxing for many parents.
This is because there are a lot of options.
There are more than 70 different providers and distributors, including banks, friendly societies and fund managers.
Providers range from the Ancient Order of Foresters Friendly Society and the Police Assurance Society to bigger High Street names, such as Halifax and Nationwide.
Parents should have received provider details in their information packs. Alternatively, a full list of providers can be found on the government's Child Trust Fund website.
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