Lump sum contributions to Child Trust Funds have risen for the third quarter in a row, according to a recent survey conducted by the Tax Incentivised Saving Association (TISA). Single contributions have risen to their highest ever level with an average value of £525. This represents an increase on the previous two quarters where average contributions were £516 and £483 respectively.
230,000 or 8.7% of all Child Trust Funds have now received an additional lump sum contribution. When the survey commenced in August 2006, only 5.5% of Child Trust Funds had received a lump sum contribution.
Child Trust Funds were introduced for all children born on or after September 1st 2002 as a means of encouraging parents to save for the financial futures of their children. In addition to a voucher worth £250 from the government (£500 for those from families with lower income), parents, family or friends can make additional contributions of up to £1,200 per year into the fund. Funds can be invested in cash, shares or bonds affording a wide range of risk and reward opportunities over the 18 year life of the Child Trust Fund. All interest, dividend or capital growth is tax free but the funds can only be drawn by the child when they reach the age of 18.
With the second voucher worth £250 (£500) set to be paid for the first time on the seventh birthday of the early account holders, Brasington is keen to encourage one off contribution's as a means to getting Child Trust Funds as fully funded as possible. Whilst he states that a regular direct debit
backed savings plan is the favoured option, he is aware that the current financial uncertainties facing many families may make this difficult to achieve.
Should they wish to improve their returns, parents can easily switch between cash or share investments or between different Child Trust Fund providers.
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