What are child trust fund accounts?

Since September 2020, people turning 18 have had access to their Child Trust Funds. And while the next few years will provide a nice cash boost for young UK adults, many don’t even realise they have a CTF account.

Since September 2020, people turning 18 have had access to their Child Trust Funds. And while the next few years will provide a nice cash boost for young UK adults, many don’t even realise they have a CTF account.

Rob Silvey
Finances expert
5
minute read
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Last Updated 26 JANUARY 2022

Child Trust Fund accounts 

Between 2005 and 2011, around 6.3 million children born from 2002 were given money by the government to save for their future. These tax-free savings accounts were known as Child Trust Funds (CTFs). 

The first CTFs have now matured and, since 1 September 2020, UK account holders turning 18 have been able to access their cash. The last CTFs will mature in 2029, when the youngest account holders turn 18.

What is a Child Trust Fund? 

Child Trust Funds (CTFs) are long-term, tax-free children’s savings accounts. 

In April 2005, the then-Labour government set up the scheme to encourage children to save and help with the costs of further education or living away from home for the first time. 

Child Trust Funds (CTFs) ran until 2011, when the coalition government put an end to setting up new accounts, and they were replaced by Junior ISAs

Although CTFs are no longer available, they may still be held by qualifying children born before 3 January 2011. This means that many young adults turning 18 in the next few years are able to access the cash in their accounts.

How do Child Trust Funds work? 

Back in the day, the government sent the parents or guardians of qualifying children a starting payment voucher of £250, or £500 for those on a low income. This voucher could then be used to set up a Child Trust Fund account in the child’s name. A further payment of £250 was added when the child reached the age of seven. 

Parents, friends and family can still top up the savings accounts as they please – up to the limits set – this is £9,000 in 2021/2022 . If parents put in the maximum every year, the fund could now be worth up to £70,000. 

All money earned by the account, including interest payments and capital gains, is tax-free. So, everything belongs to the account holder. At 16, the child can choose to operate their account or have their parent continue to manage it, but the funds can’t be accessed until the child turns 18. 

The final value of the account depends on how well the investments, or savings accounts the money was put towards, performed.

What are the different types of Child Trust Fund accounts? 

Three types of account could be opened with a CTF voucher:

  • Cash Child Trust Fund – a simple deposit account, very similar to a cash ISA, where you can put in cash and earn tax-free interest.
  • Stakeholder Child Trust Fund – savings are put into a mix of low-risk stock market investments which are chosen and managed on your behalf.
  • Shares-based Child Trust Fund – you get to choose which stock market investments you want to invest in but without the protection of a stakeholder account.

Who has a Child Trust Fund? 

The government scheme, which closed a few years back, was available for all children born in the UK between 1 September 2002 and 2 January 2011 whose parents received Child Benefit. 

If parents didn’t set up an account, HMRC set up the fund on behalf of the child. Children in care may have had one set up for them by their local authority. 

This means that many qualifying children now turning 18, might not even realise they have a CTF account.

How do I find out if I have a UK Child Trust Fund? 

If you’re not sure if you have a CTF – for example, your parents didn’t set it up or you do have an account but have forgotten the details – it should be quite easy to track down. You’ll need to set up a Government Gateway ID first, then fill in an HMRC online form on the GOV UK website

If you’re a parent, you’ll need either: 

  • the child’s Unique Reference Number, which is on the annual Child Trust Fund annual statement
  • or their National Insurance number 

If you’re looking for your own trust fund, you’ll just need your National Insurance number.

 

Finding a lost Child Trust Fund 

It’s estimated that around a third of CTFs are considered lost – that’s around one million accounts waiting to be recovered. Most of these are owned by children in care who had a CTF set up by the government. 

You can find out more about tracking down a lost CTF on the government’s website above. 

The Share Foundation can also help you track down your Child Trust Fund particularly for those who have been in care. Find out more on the Sharefound website.

Frequently asked questions

How do Child Trust Funds compare to children’s savings accounts?

A CTF is tax-free, whereas a standard children’s savings account is potentially taxable. Children have the same personal savings allowance as adults. This means they may have to pay tax on any annual interest above £1,000 . But as most kids will never earn this much, they’ll most likely never need to pay tax on their savings. 

Children’s savings accounts can be: 

  • Easy-access – kids can add and withdraw money whenever they like.
  • Regular savers – the idea is to add a certain amount each month, most have a minimum and maximum monthly deposit and some have withdrawal penalties. 

Neither CTFs nor children’s savings accounts offer particularly competitive rates now, so they might benefit more from a Junior ISA.

How does a Child Trust Fund compare to a Junior ISA?

Not only do Junior ISAs offer decent interest rates, there are also a lot more to choose from. A Junior Stocks and Shares ISA also offers a wider choice of investments. 

Like CTFs, you can’t access a Junior ISA until you’re 18, but unlike Child Trust Funds, there’s no government contribution towards a Junior ISA – only what you pay in.

Did you know?
You can’t have a Junior ISA and a Child Trust fund at the same time, but you can have one or both types of Junior ISA. Find out more at GOV UK

How do I transfer a Child Trust Fund to a Junior ISA?

While you can’t have a Child Trust Fund and a Junior ISA at the same time, you can transfer your CTF over to a Junior ISA. This can be worth checking out as many Junior ISAs offer more choice, higher interest rates or lower fund management charges. 

Be aware that once you transfer over, you can’t transfer back, so make sure you’re getting the best possible deal when choosing a Junior ISA. 

You’ll need to complete a Junior ISA transfer form and include details about your child and information about their CTF. Your new provider should carry out the transfer within 30 days, then the Child Trust Fund will be closed.

I am 18 and have a Child Trust Fund – what should I do next?

Once you’re 18, you can access the money in your CTF account and do what you like with it. 

If you want to continue saving, you could transfer your money into an adult savings account; for example, you might want to open an ISA to maintain your tax benefits. 

See how to find a good home for your savings

Why did Child Trust Funds close?

Child Trust Funds were discontinued in 2011 in favour of Junior ISAs which offered better interest rates and lower management charges.

Does a Child Trust Fund affect benefits?

No. A CTF is totally tax-free, so it won’t affect any benefits you receive.

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