Brown unveils new child trust funds

THE Chancellor of the Exchequer formally launched Child Trust Funds today, which will see saving accounts set up for every British child born on or after 1 September, 2002.

The Government will put at least £250 into each account when it is opened, and a further payment from the state will be received when the child reaches seven.

The tax-free accounts, first announced by Gordon Brown in his April 2003 Budget, are designed to encourage a culture of saving and to provide a lump-sum for every youngster when they reach 18.

Financial Secretary to the Treasury Stephen Timms said the new accounts are intended to boost the culture of saving and make sure every young person has a worthwhile financial asset available to them at the age of 18.

He added: 'Every child in a class will have one, so schools will be able to cover it and build children's financial capability. I think that is going to be a very important benefit. There is very good evidence that even a modest sum available at that very critical point in a young person's life can make a very big difference to their life chances for the future.'

Children will not be able to access funds in the accounts until they reach 18, by which time it is hoped that interest and additional payments will have helped it grow enough to provide money to buy a car, put down a deposit on a flat or start a business.

Parents and other relatives will be allowed to put up to £1,200 into each child's fund every year. The first forms will be sent out to parents this week, and vouchers from the Inland Revenue will follow next week. The accounts themselves will finally be opened in April.

Children born between 1 September, 2002 and this April will receive larger initial payments of up to £277, to represent interest they could have earned between the announcement of the scheme and its implementation.

The children of families receiving Child Tax Credit will enjoy an additional payment of up to £250 - but children born before 2002 will not be eligible for the funds.