Children born between 2nd September 2002 and 2nd January 2011 benefited from the Child Trust Fund (CTF) introduced by the Labour government as an attempt to encourage children to save. Between these dates, new born children were given a £250 voucher each to be held in a CTF with an additional £250 credited at age 7.
Parents were given the opportunity to select the CTF but, if they didn’t, government selected it for them. Additional contributions were permitted up to a current limit of £4,260 pa. There were eligibility requirements but, broadly, if parents qualified for child benefit in respect of the child then the CTF was available. And, CTFs had all of the same tax advantages as ISAs.
These accounts are administered by the parents until the child reaches age 16 at which stage the child takes over the administration, including selection of investment funds. There is no access to the investment until the child attains age 18.
The CTF was replaced by the ‘Junior’ ISA (JISA) in 2011 and this had broadly similar limits but, because it was an ISA, there were far more providers available and JISAs were cheaper than the CTF as well as having much wider investment options. The lack of access to the investment until the child attains age 18 was carried forward into the JISA regime. CTFs are no longer available although it remains possible to contribute to existing CTFs BUT it is not possible to have a CTF and a JISA for the same child. Of course, the big difference is that there are no government contributions towards a JISA.
So, why the history lesson? Well, it seems that nearly £1 million CTFs are ‘lost’ as families have lost paperwork or moved home without remembering to tell the CTF provider etc. And with the ‘average CTF’ being worth £650 (£500 from government and some growth) that’s a lot of money unaccounted for. And, of course, the first cohort of CTF beneficiaries is now reaching age 16 and can/should be taking control of their accounts themselves. Of course, since there are no more funds coming into the account from government, this is also the time to think about transferring the CTF into a JISA, which has been possible since April 2015 in order to benefit from the generally lower costs.
If you are the parent of a CTF beneficiary and can’t remember where it is – the CTF, not the child – the tax man can help as they have pretty complete records. HMRC has set up a ‘find your CTF’ service which requires signing into the Government Gateway www.gateway.gov.uk