Child Trust Funds starting to mature for children turning 18
On 1 September, the first group of Child Trust Fund (CTF) savers turned 18 and were able to unlock the money in their account. According to HMRC, approximately 55,000 more accounts will now start to mature each month.
What is a Child Trust Fund?
A Child Trust Fund (CTF) is a long-term tax-free savings account for children, set up through a Labour Government scheme in 2002, to encourage parents to save for their children. Under the scheme, parents of children born from September 2002 were able to set up an account and were given vouchers by the Government to invest, tax-free, for their child’s future. The government initially put £250 into the account during a child’s first year, then added another £250 when the child reached the age of seven (£500 for lower income families). Savings could now be worth more than £1,000, or more if parents, family or friends topped this up with their own contributions, up to set limits.
Child Trust Funds were available to all children born in the UK (regardless of the nationality of the parents), whose parents were awarded Child Benefit between 1 September 2002 and 2 January 2011. Only children born between 1 September 2002 and 2 January 2011 were eligible for a Child Trust Fund account. From then, parents had the option instead of applying for a Junior ISA.
How can the savings be accessed?
Money in a Child Trust Fund account belongs to the child and is ‘locked in’ until they turn 18. On maturity, Child Trust Funds can either be cashed in or transferred into an adult ISA. When a young person turns 16 years old, they can legally take over responsibility for their Child Trust Fund account and can make decisions about the fund (such as switching to another provider or transferring it to a Junior ISA). They can do this by contacting their Child Trust Fund provider. However, they can only withdraw money from it at age 18.
For those who do nothing, the Child Trust Fund provider will move it into an Individual Savings Account, which is also tax-free, or roll it into another account with similar benefits.
I can’t remember if my child has a Child Trust Fund
Parents were invited to open a Child Trust Fund with one of a number of providers within a year of their child being born. About 4.5 million were set up by parents or guardians. Children in care had accounts set up by local authorities and these are now managed by The Share Foundation – a charity which is also helping people to track down their funds. In 1.8 million cases where parents did nothing, the accounts were set up automatically by HMRC.
HMRC admits that in, potentially many thousands of cases, young people may have no idea that they have such savings. This can be because HMRC set up the account on their behalf (if the parents did not open one), or because it has been forgotten and the parents have not updated their address.
However, lost accounts can easily be located. You can find a Child Trust Fund, even if you don’t know the provider. Go to the GOV.uk website and fill in the HM Revenue and Customs (HMRC) form. This tells HMRC to check where the account was originally opened. You’ll need a Government Gateway user ID and password. If you don’t have a user ID, you can create one when you fill in the online form. HMRC will send you details of the Child Trust Fund provider by post within three weeks of receiving your request. Alternatively, or if you have any difficulties, visit https://www.sharefound.org/ for further information.
What about Child Trust Funds and young people with a disability?
Some young people with a disability might not have the mental capacity to manage the money in their Child Trust Fund. If your child does not have mental capacity, then you must apply to the Court of Protection to act as your child’s Deputy. A Deputy is someone, usually a family member, who is appointed by the court to manage and make day-to-day decisions about someone’s finances. Without this, you will not be able to manage the account when your child turns 18, as they legally become an adult and the money belongs to them.
Find out more
You can read more about Child Trust Funds, and their replacement – the Junior ISA – in the information factsheet on our website.
Our Family Benefits Advice Service offers advice and guidance on the wide range of financial support that families may be entitled to – to speak to one of our trained advisors, Freephone 0800 028 3008.