To encourage saving, the Government is to introduce the Child Trust Fund early in 2005. This gives every child born on or after 1st September 2002, a personal kickstart to their savings worth at least £250. (It can rise to £500 if your family receives the full Child Tax Credit).
The initial £250 will be paid as a voucher, to be sent to all qualifying families during the first few months of 2005.
When you receive your voucher you will need to invest it in a special Child Trust Fund account. Any growth on your child’s account will be free of income and capital gains tax year after year, until he or she takes out the money at age 18 (and not before!).
What’s more, anyone else can make additional deposits into this tax-free account each year, up to an annual total of £1,200.
Which is why it’s such a great way to build up a lump sum for your child.