Child Trust Funds (CTFs) are long-term tax-free child savings accounts that were offered between 2002 and 2011. If your child was born between 1 September 2002 and 2 January 2011 then there’s a good chance they have one.
As part of this scheme, the government contributed up to £250 (or £500 for low income families) as incentives into CTFs , encouraging parents to open a savings account and get in the habit of putting money aside for their children. Once the child turned 7, the government issued another contribution of up to £250 (or up £500 for low income families).
There were three accounts of child trust funds; cash child trust funds (which were very similar to a cash JISA, stakeholder child trust funds (these were invested but had certain rules around them) and shares-based child trust funds (these were similar to junior stocks & shares ISAs)
The government stopped them in 2011 and replaced them with the JISA but those that were already opened remained open.
If your child has a CTF already you have two main options. The first one is to stick with the CTF and use it as your primary account for your child’s future. Your second option is to transfer it to a Junior ISA.
If you decide to stick with a CTF, you can continue to pay up to £9,000 a year into your CTF. The “years” for CTFs are not the same as the standard financial year (6th April in one year to 5th April the next). Instead they run from the child’s birthday to the day before their next birthday. )
Like a JISA, there’s no tax to pay on any income or any profit that it generates and anyone can contribute to it (family, friends, etc.).The money is locked until the child turns 18 and at that point they can access the money without any control from the parents.
In 2011 the scheme was discontinued and replaced by Junior ISA. This means that you can now transfer your CTF into a JISA.
The process of transferring your child trust fund into a junior ISA is rather simple and doesn’t involve much work on your part once you locate your CTF provider.
Most JISA providers will just ask you to fill out a form with relevant information so they can locate your CTF and they’ll process the transfer on your behalf with your approval.
It’s generally thought that parents should transfer their children’s CTF to a junior ISA for the following reasons;
Ultimately, the choice lies with the parent and there is no obligation to change.
No, you cannot have both accounts at once as JISAs are a replacement for CTFs. Once you transfer an existing CTF to a new JISA you will no longer be able to hold on to the CTF.
It is estimated that millions of CTFs have been lost since the closure of the scheme as people forgot about them or simply didn’t know how to access them anymore.
If you want check whether you opened a CTF for your child, you can easily do so following these steps:
If you can't do this online then you can send the information above to HMRC by post to the following address:
Charities, Savings and International 1, HMRC, BX9 1AU
When investing, your capital is at risk and may be going up as well as down which means you may be left with less than your initial investment. This article should not be read as personal financial advice. Individual investors should make their own decisions or seek independent advice. Past performance isn’t an indicator of future performance. Please note that tax treatment depends on the individual circumstances or each client and may be subject to changes in the future.