Child Trust Funds (CTF) were set up in 2002 and all babies born between 1 September 2002 and 2 January 2011 received a gift of at least £250 from the Government to save in a CTF. Lesley McReynolds reflects on Child Trust Funds and how CTFs and Junior ISAs can be used to help towards your and your children’s financial goals.
Who has a Child Trust Fund?
Last Any children or grandchildren aged 7-16, (born between 2 September 2002 and 2 January 2011) will have a Child Trust Fund (CTF). According to the Share Foundation charity, 1.1 million parents have lost track of £1.5 billion worth of CTFs. Even if you did not even claim the money for your child, the Government would have placed it in an account for them and allocated to a default fund, typically a UK equity index tracker.
What does a CTF offer?
A Child Trust Fund was introduced to encourage saving at a young age and to provide a foundation for providing for school fees or further education costs of university or apprenticeships.
A CTF was initially set up with a £250 voucher when the child was born and a second £250 voucher at the age of seven. The Government payments were scaled back from August 2010 until CTFs were stopped in January 2011. Existing CTFs mature when the child reaches age 18, but at age 16 the child can manage their CTF.
Child Trust Funds (CTFs) were replaced in January 2011 with Junior ISAs, but there were six million CTFs set up.
Tracing your CTF
HM Revenue & Customs (HMRC) have set up a tracing service at www.gov.uk/child-trust-funds to help you locate your CTF. If your child is now 16, then they can use the tool to locate it themselves.
1. Go to HMRC’s tracking tool. You’ll need to log in using a ‘Government Gateway ID’ – you’ll have one of these if, for example, you fill in a tax return or have renewed your driving licence online. If you don’t have one, you can create one online.
2. Fill in your details, including address and phone number.
3. Fill in your child’s details, including name and date of birth.
4. You should hear from HMRC within 15 days – they will either request further information or confirm the provider of the CTF and contact you by phone or post.
5. You can then contact your CTF provider and find out about the account
What should you do with a CTF?
Even if you have not set aside any additional funds for further education costs for children or grandchildren – it is never too late to start. Relocating the CTF can provide a prompt to put some savings aside which can contribute towards future education costs, as average student debt for graduates in England is over £50,000, or provide a helping hand to get onto the property ladder.
With an existing CTF, parents or grandparents can contribute up to £4,260 in tax year 2018/19 and may choose to:
- make additional payments into the CTF; or
- transfer to a Junior ISA and make additional contributions, to benefit from:
- more investment choice;
- wider provider choice; and
- potentially lower charges.
The CTF will be under the management of parents until age 16, when it will transfer to the child. Some CTFs may not be able to be transferred into a Junior ISA.
Ask an Origen adviser to review your financial goals for your children or grandchildren and we can then review whether a Junior ISA or making additional payments to a Child Trust Fund is the best option. We can assess any shortfall in meeting the costs of further education and recommend ways for financial planning which can fill that gap or reduce it to a more manageable level.
This article is for information only and is not to be taken as Financial Advice.