As the first batch of Child Trust Funds begin to mature, Technical Connection offers advice on next steps
A Child Trust Fund (CTF) is a tax-free savings account for children born between 1 September 2002 and 2 January 2011. CTFs are no longer available but it is still possible to save, where an account has already been opened, until the child reaches the age of 18. The CTF subscription limit for 2021/2022 is £9,000 and the limit applies for the period starting with the child’s birthday, ending on the day before their next birthday.
Broadly, under the scheme, vouchers for specified amounts of up to £500 were provided by the UK government and had to be invested in a CTF account in the beneficial ownership of the child, but the parent could choose the account provider. If an account was not opened by the child’s parent/guardian, HMRC set one up on the child’s behalf. Between 2002 and early 2011, about six million CTFs were opened by parents or guardians, with a further million set up by HMRC.
With regard to investment options, there were three main types of CTF accounts available – stakeholder, share or cash account.
At 16 years, a child can choose to operate their CTF account or have their parent/guardian continue to look after it, but they cannot withdraw the funds. At 18 years of age, the CTF account matures and the child is able to withdraw the funds, or they could transfer it into a cash ISA or a stocks and shares ISA without the transfer counting as a new ISA subscription.
The first CTF accounts matured in September 2020, which means that it is now more than a year since the first account holders started turning 18-years-old. According to HMRC, about 55,000 CTF accounts will mature every month. While hundreds of thousands of accounts have been claimed so far, many have not.
Finding your account
It is likely that some children may not be aware that they have a CTF account – or some parents or guardians may have forgotten who they set the account up with. To help them find their accounts, HMRC has created a simple online tool, which is available on its website: www.gov.uk/child-trust-funds/find-a-child-trust-fund
Any young people unsure about whether or not they have a CTF should first ask a parent or guardian if they remember setting one up. Once they know who their provider is, they should contact them directly and either request to withdraw the money or transfer the funds into an adult ISA or other savings account.
For those who cannot access the tool, HMRC will provide alternative, non-digital routes to finding a CTF provider on request. HMRC will send details of the provider by post within three weeks of receiving the request.
All is not lost, because in cases where the CTF provider has received no instructions on the future of the investments from the account holder, those investments must be placed at maturity and, at the option of the account provider, in a ‘protected account’ pending instructions. The protected account can be a matured account or a cash ISA or stocks and shares ISA offered by the current CTF provider, thereby ensuring that the funds continue to grow in a tax-free environment.