What is a Child Trust Fund?
It is a tax-free savings for children who were born between 1 September 2002 and 2 January 2011. The scheme ends in 2011 but you may still add money to it. So, if you are born on the said dates and by chance reading this, you may have a forgotten bunch of money somewhere in a trust fund.
The Concept of the Child Trust Fund – A Brief Introduction
The Child Trust Fund is a program established by the UK government with the vision to encourage families to save money for their child's future. Every eligible child receives a financial account at birth, whereby the government contributes an initial sum which parents and relatives can then add to over the years. The fund was in operation from 1 September 2002 until 2 January 2011, with a goal to foster the development of saving habits and provide young adults with a welcome financial boost during a critical stage in their lives.
Understanding the CTF Components
The Initial Government Contribution
When the Child Trust Fund came into effect, the government provided an opening contribution for each eligible child, with an additional amount for those from lower-income families. This seed money was a significant step towards kickstarting the savings for the child's future.
Family and Friend Contributions
One of the distinctive features of the Child Trust Fund is the opportunity it provides to family and friends to contribute to the child's savings account. These extra deposits could substantially increase the value of the fund over its lifespan. Anyone can make contribution to a child trust fund.
Tax-Free Growth and Interest
Any money within the Child Trust Fund grows free from the clutches of the Treasury, thereby accumulating interest at a potentially accelerated rate compared to other taxable accounts.
Child Trust Fund in the UK - Is Your Child Eligible?
The eligibility window for the CTF was relatively short, spanning between the September 2002 and January 2011 period. Children who meet the age cut-off and are legally entitled to a CTF can benefit from the scheme. This includes:
- Those who were born within the specified date range
- Children who were living in the UK were granted asylum or had living rights in the United Kingdom at birth
- Individuals under a Child Arrangement Order
Claiming a Forgotten Child Trust Fund
For many, the concept of a forgotten Child Trust Fund may not even register as a possibility. However, with dormantly open accounts potentially holding considerable value, it's worth the effort to track them down.
Searching for an Unclaimed CTF
You can simply contact your child's trust fund provider. If you don't who your provider is you can either ask your guardian or parent or contact HMRC. Because even if your parents didn't open a child trust fund with the voucher they were given within you 12 months of your birth, HMRC would have.
You need to make the following ready when you contact HMRC;
- If you are the child, your National Insurance Number
- Adoption details if they are available to you
If you are a parent or a guardian, call HMRC;
- The child's name and surname, DOB and full address
- If there are any, previous names you or the child have used
Reconnecting with Your Child's Savings
Once the CTF is located, the road to accessing it involves updating details and choosing a suitable provider for the fund. This stage sets the groundwork for controlling the account and deciding on future contributions if desired. HMRC sends you a letter within 3 weeks of your call, if you don`t receive a letter, write to;
Charities, Savings and International 1
HMRC
BX9 1AU
Contributing and Growing the Child Trust Fund
The growth of the Child Trust Fund is neither solely dependent on the initial government contribution nor the sum total at birth. Regular additional deposits from parents, relatives, or donors can significantly contribute to its substantial growth over time.
Registered Contact
When you manage a child trust fund account, you become a registered contact, just a like a director of a company, the title comes with certain capabilities like;
Changing the address and type of the account, changing the provider, for example from Natwest to HSBC, essentially orchestrating how the account should be run.
Transfer Child Trust Fund to Junior ISA
A Junior ISA is a tax-efficient savings account for children that replaced the Child Trust Fund scheme in 2011. While existing CTFs can still receive additional contributions, they cannot be transferred to a Junior ISA without closing down first.
You can't have both the Child Trust Fund and Junior ISA. Junior ISA has two types of savings: cash and stock/shares. Your child can have both Junoir ISAs, 1 cash and 1 stock/shares but no more than that. Upon filling out the form that's from your provider, you can open your account for Junior ISA. If your child is 16 or 17 they can open their own Junior ISA accounts.
Records You Need To Keep
- Statements,
- The child's unique tax reference number (UTR)
- Details of the account type and your provider
How to Access Child Trust Fund at 18
When a child with a Child Trust Fund turns 18, they have access to the account and can withdraw the money or continue saving in it. They can also choose to transfer the funds into another savings account.
The child can make two things after their 18th birthday;
- can take the money out,
- or can transfer the money to an Adult ISA account
Regardless of the action, the accounts management automatically goes to the child the moment they turns 18 and the account cant be added more money to.
Government Child Trust Fund £250 How Much will i get?
The government child trust fund scheme provided a £250 initial contribution for each eligible child, with an additional amount for those from lower-income families. This means that a child from a low-income family would receive a total of £500 as their initial seed money.
However, this amount may vary depending on the income and eligibility criteria set by the government at the time. It is always best to check with the relevant authorities for the most up-to-date information on government contributions to the Child Trust Fund. Additionally, ***remember that regular deposits from family and friends can also greatly contribute to the growth of the fund over time.
Conclusion
In conclusion, the Child Trust Fund scheme provided a unique opportunity for children in the UK to save and grow their money tax-free. While it may no longer be open for new accounts, there are still options for those who have forgotten about their CTFs or want to contribute to their child's future savings. It is essential to stay informed and keep track of your child's CTF to ensure they can make the most of their savings when they turn 18. So, keep the records organized and remember to involve your child in the decision-making process once they become a registered contact for their account. Let's help our children build a strong financial foundation for their future.
