• David Langley

Child trust funds – the lowdown


Around 6.3million children born between 1 September 2002 and 2 January 2011 can now begin to be able to access billions of pounds paid into Child Trust Funds when they turn 18.

These tax-free savings accounts were set up for all children born throughout most of the 2000s with government vouchers of £250, or £500 for those from lower income families, with parents, family and friends able to contribute too. Cash and investment options were available, with the total amount saved an estimated £7.45billion in 2016, according to the taxman, a figure which will have increased over the last few years as savers earn interest or their investments grow in value.

It means hundreds of thousands of teenagers every year could receive thousands of pounds, with some whose parents paid in the maximum each year set to gain access to a pot of up to £200,000, according to one provider. But what happens to a Child Trust Fund when its holder turns 18, and what are the options available?

Some 420,000 CTFs are estimated to mature this year, with their holders turning 18. Holders can manage their money when they turn 16 but can only choose to withdraw it or move it somewhere else when they become an adult. Provided the CTF provider still has contact details for you, they will contact you before your account matures outlining the available options you have. The main ones are to withdraw all or some of the money as cash, transfer it to an adult ISA from another provider, or keep it with the current provider.

If someone holds a cash CTF with a provider, then it would be transferred into a Cash ISA, with the same going for stocks and shares versions. If a provider does not offer a tax-free adult ISA, it will instead be transferred to an equivalent account which keeps its tax-free status, so savers can continue to benefit from the interest while they decide what to do with it. CTFs will also be transferred to tax-free accounts in instances where an accountholder doesn't contact their provider with their choice before they turn 18. This is particularly important for those who no longer have details for their CTF, or where HMRC set up an account on behalf of their parents and nothing was added to the initial government voucher, as it means they don't lose out on earning tax-free interest.


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