For every child born on or after 1 September 2002 until 2nd January 2011, where the parent was eligible for Child Benefit, the Government issued a voucher worth at least £50 which could only be used to open a Child Trust Fund (CTF).
The money was invested in a tax-efficient fund, and cannot be withdrawn by your child until they reach the age of 18.
Although CTFs are closed to new business, you can add an existing account. There are a number of different ways to make additional contributions into a CTF by you, friends or relatives. These include setting up a direct debit or standing order, paying in by cheque or over the phone. Whichever option you choose, you should be aware:
Your child’s savings are invested mainly in the stock-market so your savings have more potential to grow. However, please bear in mind the value of the fund may fall as well as rise and returns are not guaranteed and the capital is at risk.
The money is invested in a Fund, which offers lower risks than investing directly in shares – because the fund spreads your child’s investment across equities, bonds and cash. There is still a risk that your fund value could go down as well as up.
A child cannot have both a CTF and a Junior ISA, but an existing CTF with us can be transferred to our Junior ISA. To speak to our Junior ISA team, please call us on 0345 877 7103. If you have any questions including how to add funds or the charges applicable please contact us.
A Child Trust Fund (“CTF”) is a savings (Cash) or investment (Stocks and Shares) account that launched in January 2005 and was available for children born between 1st September 2002 and 2nd January 2011. The CTF preceded Junior ISA (“JISA”) and was initially a government incentivised scheme, whereby free cash vouchers for £250 (up to £500 for low income families) were issued to each child. The person with parental responsibility could then open an account with the voucher, on behalf of the child.
Any income and gains on the account are exempt from UK income tax and UK capital gains tax. The CTF holder, (the child), the registered contact (person with parental responsibility) or other third parties (i.e. grandparents/friends), can collectively make contributions up to the subscription limit allowance (‘allowance’) for each year, which for 2018 is up to £4,368.
The allowance year runs from your child's birthday in one year to their next birthday.
You can’t open a CTF account because the scheme is now closed to new applicants. You can however apply for a JISA instead.
No. Only your child can withdraw their money in the CTF when they reach the age of 18, and this has to be in totality. There are no partial withdrawals permitted.
Should your child become terminally ill before age 18, the registered contact will need to apply to HMRC for authority to withdraw the money. Where your child has passed away the CTF is payable to your child’s personal representatives subject to appropriate evidence of death.
If your child has a CTF but you don’t know with which provider, you can find out by following the below link and filling in the form online to ask HM Revenue and Customs (HMRC). You’ll need to sign in to your Government Gateway(opens in a new window) account or register for one.
Although you can no longer open a new CTF, you can transfer your child’s existing CTF to another CTF provider.
A CTF can be transferred to a JISA. This could be to the same provider (check your provider facilitates this) or to a new JISA provider.
A CTF can be transferred to another CTF provider, a Cash JISA or a Stocks and Shares JISA prior to your child’s 18th birthday. Your child and/or the registered contact will be contacted prior to your child’s 18th birthday outlining the options for your child at age 18, of which one could be the ability to move the investment into an adult ISA.
Income and gains earned within both a CTF and JISA are exempt from UK income tax and UK capital gains tax, so the reasons to transfer may be decided more on other factors such as type of products a provider offers, your risk appetite and the fees charged.
If unsure, you should seek professional advice.
When deciding what to do, you have two options:
If you have a Cash based investment you will receive a set interest rate. During low interest rate environments, returns on cash are generally lower and inflation can erode away earnings potential, so some investors prefer to take on a little more risk for potentially higher returns. It’s important to remember that regardless of the level of risk, a stocks and shares JISA is invested in the stock market and the value of the Junior ISA can go down as well as up and your child may get back less than was invested.
Once your child turns 16, they can either:
When your child turns 18, they will automatically take over the account and can take out the money.
If your child wishes to take over the account at 16, they need to contact their CTF provider who will advise them on what they need to do. Your child will not be able to withdraw the money until the age of 18. The parent is not able to stop this.
When your child turns 18 the account will be transferred into a matured CTF account until it is claimed. Your child will be sent a communication prior to maturity outlining their options upon maturity, which will consist of either transferring to another account or taking the money.
If you’re the main contact for the CTF account you’re called the ‘registered contact’. You have certain responsibilities until your child turns 18, unless your child chooses to take control of their own account at age 16.
Your responsibilities as the registered contact are to ensure the following:
Money in your child's CTF account will not affect any benefits or tax credits you receive, and neither you nor your child will pay UK income tax or capital gains tax on money earned in a CTF account.
To speak to our Child Trust Fund team, you can call us on 0345 300 2585 - Text Relay UK: 18001 0345 300 2585.
Cora can help with a wide range of queries and show you how to do your banking.
