What is a CTF?
Child Trust Funds(CTF) were introduced by the Government in 2005 to encourage parents to save for their child's future. Parents and other family members are able to contribute to a Child Trust Fund.
This offers a range of possibilities to choose from when deciding what to do with their money when they turn 18. The money could be used for university fees, getting on the property ladder, driving lessons, a first car or travelling the world!
The history of the Child Trust Fund
Parents of children born in the UK between 1st September 2002 and 2nd January 2011 were given a Child Trust Fund monetary voucher from the Government. Most Child Trust Fund vouchers were for the value of £250, later reduced to £50 due to the Government's amended regulations in August 2010. If the parents or guardians were on a lower income, they received up to £500 in Government vouchers.
Parents had the option of placing their Child Trust Funds into a Stakeholder or Non-Stakeholder account. They could choose from a number of different Child Trust Fund providers.
A Stakeholder account has to meet certain standards laid down by the Government. These include maximum limits on charges, low minimum contributions, and how money can be paid into the Plan. They were introduced to offer customers a straightforward, low-cost and risk-controlled way of saving for children.
The child's Plan may be lifestyled in its later years by the provider. Lifestyling limits the risk of any equity loss before the maturity date of the Plan. Customers have the right to opt-out of lifestyling. Any plans that do not conform to the Stakeholder regulations are classed as Non-Stakeholder products. Examples of Non-Stakeholder products include cash-based accounts or high-risk investments.
When the scheme was running, an additional payment of £250 or £500, was made when the child turned 7, for lower income parents. Children whose seventh birthday was between September 2009 and 31st July 2010 were eligible. These payments were stopped as part of the amended Child Trust Fund regulations.
Child Trust Funds were gradually withdrawn, with the Government announcing that their contribution vouchers would reduce to £50 in May 2010. All new Child Trust Funds were stopped by the Government on 2nd January 2011. Child Trust Funds were effectively 'replaced' by Junior ISAs. One difference is Junior ISAs do not include a contribution in the form of a monetary voucher from the Government.
From April 2015, the Government announced anyone with money in a Child Trust Fund had the choice to transfer the money to a Junior ISA. Accessing the money invested over the years in the Child Trust Fund can provide opportunities for an exciting future. The child is the owner of the fund, and they will be able to choose what they do with the money. Since 1st September 2020, children with Child Trust Funds have turned 18 and have been able to access their funds.
At Foresters Financial, we are one of the largest children's savings providers. We pride ourselves by helping parents save for their children’s future.
How does it work?
Money can be added to a Child Trust Fund by family and friends, and the Government sets an allowance for each year. It is a tax-free child savings and investment initiative, just like a Junior ISA.
As the money saved is for the child's future, nobody can access the money paid into the Plan. The child will be able to access the money after their 18th birthday. Seeing the excitement on their faces when you tell them about the money that has been saved over the years will be rewarding. You'll know that you have helped open a number of opportunities for an exciting journey into their adulthood at age 18.
To find our more about what happens to the Child Trust Fund when your child reaches 18, please visit our Child Trust Fund information Hub>
What do I, the parent, need to know?
Child Trust Funds were created as an effective savings strategy introduced by the Government. They are a way for parents to invest money for their child's future, with the benefit of a monetary voucher.
A person with parental responsibility will be the Registered Contact for the Child Trust Fund. The Registered Contact is responsible for managing the Plan for the Child. Most often this will be the case until the child's 18th birthday. At age 16 the child can take over the responsibility of managing their Child Trust Fund. From this age they can become the Registered Contact - parents can play this role up until their child's 18th birthday.
Since September 2020, children with Child Trust Funds have turned 18 and have access their savings invested on their behalf. In the run up to their birthday, ask them have they thought about their future. It is likely that they will be coming to their parents for advice on what to do with their Child Trust Fund. You could start asking them questions on what they plan to do with their money, no matter what the value of the Child Trust Fund may be. They will have many options available if they decide to spend some of their funds or continue to invest.
HMRC spoiler alert
If you have not talked about a Child Trust Fund with your child, they are likely to find out before their 16th birthday. When your child receives their letter from HMRC with their National Insurance number, this will mention their CTF. This is a great opportunity for you to sit down and speak to them about the savings they have waiting for them. If you want the money in your child's Child Trust Fund to be a surprise, as a birthday present, make sure to let them know before HMRC contact them. Don't let the surprise be ruined.
Can I still contribute to the Child Trust Fund?
New Child Trust Funds can no longer be opened. The good news is you, your family and friends can continue to contribute to your Child's CTF until they turn 18.
If your child has a Child Trust Fund in place with us, you can save from as little as £10 a month. Payments can be made through single or monthly contributions. These must not exceed the yearly contribution limit, which is £9,000.
We offer multiple ways to contribute to a Child Trust Fund. You can contribute online, over the phone, via post or with a Financial Adviser. Monthly contributions can be made by Direct Debit or through your bank. A single contribution can be made by a debit card payment, bank transfer (direct credit) or cheque.
As with all stock market investments the value of your child's Child Trust Fund can fall as well as rise, and you may get back less than has been paid in.
My child has a Child Trust Fund – who is the provider?
If a parent or guardian did not choose a provider to place the Child Trust Fund with, the Government would have done this on your behalf.
You can find out which provider the CTF is held with by creating a Government Gateway ID on the GOV.UK website. The Government would have placed the voucher with an approved provider if a Child Trust Fund account was not opened by the parent/guardian. Once the CTF has been located, you will receive a letter stating who the CTF provider is. You will then be able to contact them for next steps on managing the Plan. This may take some time, but you will find the answer to where your child's Child Trust Fund is.
If you are the child (the Planholder) looking for a lost CTF, you can do this using the CTF Register. You will need to be aged 16 or over and have your National Insurance number. If you don’t know your National Insurance number, find out more here >
I have found the Child Trust Fund provider – what do I do now?
Once you have found the provider you (the parent, someone with parental responsibility, or the Planholder - if aged 16 or over) - will need to become the Registered Contact. A Registered Contact is needed on the Plan to be able to manage the Child Trust Fund.
If we are looking after the Child Trust Fund and would like to become the Registered Contact, please download and complete the form. If you would like to change Registered Contact to another person with parental responsibility, or you are the child (age 16+), the current Registered Contact will have to request this by calling Customer Services. Once completed, you will be able to activate a MyPlans account. With MyPlans you can manage and view the Plan online, make contributions and see the value and fund performance.
Tax treatment depends on individual circumstances and may be subject to change in the future.