Boy checks finances and Child Trust Fund

If you have a child or children reaching the age of 18 between now and 2029 their Child Trust Funds (CTFs) are due to mature.

The CTFs are tax-free savings accounts given to 6 million children born between 1 September 2002 and 2 January 2011. Anyone reaching the age of 18 in the next 8 years or so could access up to £1,000 if parents made contributions.

You may have forgotten about your child’s CTFs, especially if you didn’t make any contributions. Our guide about Child Trust Funds will help your child access their funds, and we’ll offer hints and tips about what to do with the cash.

What are Child Trust Funds?

Set up by the Blair government, CTFs encouraged parents to save for their children’s futures. The aim was that the cash could help with future costs, such as further education funding.

Initially, the government gave £250 into the tax-free account during a child’s first year. A further £250 was paid in when children reached the age of 7. The payments were £500 for low-income families.

Parents, family and friends are still able to contribute to the account to top it up to a maximum of £9,000 per year. New CTF accounts were eventually scrapped in January 2011.

How they work

When they mature, CTFs become adult ISAs and retain their tax advantages. While children legally take responsibility from the age of 16, they cannot access the money until they are 18.

Parents or guardians were sent vouchers by HMRC for each child to set up a CTF account in the child’s name. Three accounts were opened:

  • Cash Child Trust Fund: This allowed parents to make deposits just like a bank account to earn tax-free interest.
  • Stakeholder Child Trust Fund: Savings are put into a mix of stock market investments with rules to reduce financial risk. They are charged based on the value of the fund and capped at a charge of 1.5% a year. If parents forgot to use the payment voucher within 12 months, HMRC opened one of these accounts.
  • Share-based Child Trust Fund: Most if not all the cash in this account is invested in shares without protection.

Each year, around 800,000 teenagers will gain control of their CTFs, and while the temptation might be to spend, research shows that teenagers would prefer to invest or save their money.

Finding lost Child Trust Funds

Around 2 million Child Trust Funds are estimated to have been lost by families, especially if HMRC set up the account. Don’t worry, because the funds are easy to find.

To find a fund, visit www.gov.uk/child-trust-funds and fill in the form, as this tells HMRC which account was originally opened. You will need a Government Gateway ID and password, which is fairly simple to set up. Once HMRC locates the details of the CTF provider, they will contact you with information by post within 3 weeks of your request.

What to do next

When your child reaches their 18th birthday, they have a number of choices:

  • Withdraw the money and spend it, perhaps using it to help fund a new car or a house deposit.
  • Convert it into an ISA (Individual Savings Account) to maintain the savings for a future purpose.
  • Use it to open a Lifetime ISA (limits apply) which can provide a 25% government bonus for use towards buying their first home.

Co-Navigate clients who have children or grandchildren can always ask us for help or guidance on the options available.

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