A Child Trust Fund for Muslims

Shariah Baby Bond®

Every child born in the UK on or after 1 September 2002 now receives at least £250 from the Government to be invested in a compulsory Child Trust Fund (CTF) account. Presently, it is the Government's intention to give a further voucher of £250 when the child attains the age of 7. A further payment of £250 at the age of 14 is also being considered.

The vouchers can only be invested with accounts in the child's name with approved and regulated financial institutions (CTF providers). The vouchers have no cash value. In addition to the monies provided by the Government, parents, relatives and friends can invest additional amounts up to £1,200 per year in the child’s account. The child will have access to all the funds and accumulated investment returns in the account at the age of 18. Parents do not have to invest anything in addition to the vouchers, but have the option of taking advantage of the £1,200 per year limit to create a substantial fund for their child at the age of 18.

Parents can choose the CTF provider with whom they want to open their child's account. They can also switch providers without penalties if they so wish. If parents fail to invest the vouchers within one year of receipt, the Government will allocate a default provider for them from a list of approved institutions and send the voucher to them. The parents will receive notification of this allocation and will still be able to switch to a provider of their choice if they so wish.

It is expected that with an18 year time horizon for the funds under management, providers will be able to achieve attractive investment returns. There are also provisions to lock in any gains in the last 4/5 years of the CTF to guard against any adverse market movements before maturity. The vouchers are intended to enable parents, relatives and friends help children to have a solid start when they begin to incur financial commitments for education and other requirements.

Providers will invest the monies in a variety of funds and markets. For Muslims, some of these investments may not be acceptable. Thus, for example, investments in shares in alcohol, gambling and pornography are considered to be unacceptable. Similarly, investments in activities involving riba (usury) are also not acceptable.

Muslims will want to have the possibility of investing with providers who can restrict investments in activities that are compatible with the Shariah. Fortunately, this is now possible and need not necessarily compromise investment returns on the funds. A recent survey shows that the performance of the stocks in the FTSE and Dow Jones Islamic Indices has in fact been better than that in the global indices over the last five years.

The Children's Mutual has become the first provider in the UK to offer the Shariah Baby Bond. The Children’s Mutual, which is a leading provider of products for investment for children, has teamed up with a reputable fund manager to provide such a Shariah compliant CTF. All investments are regularly monitored by a Shariah Board to ensure that they comply with the agreed rules acceptable to Muslims.

The Shariah Baby Bond provides Muslims with a unique opportunity to invest for their children's future in accordance with the tenets of their faith.

Call 0845 608 0045 to receive full information about the Shariah Baby Bond, or click here for further information