Child Trust Funds were launched in 2005 and made available to all children born in the UK between 1 September 2002 and 2 January 2011. They have now been replaced by junior ISAs.
The aim of CTF accounts was to engender a savings habit among children; providing a cushion of financial assets as they embark on adult life and empower them to be confident in the management of their financial affairs.
Even though this scheme has stopped, existing CTF accounts can continue until the child is 18. While children who qualified for a CTF are not eligible for junior ISAs, they can transfer it to a junior ISA.
Operation of scheme
HMRC sent the parents or guardians of qualifying children a starting payment voucher of £250 or £500 depending on household income for them to invest. If they failed to open a CTF account within a year of having received a payment voucher, HMRC opened a stakeholder CTF account on the child's behalf. From 1 August 2010 to 1 January 2011 the payment ranged from £50 to £500.
Family and friends were able to add further sums into the account. All capital gains, interest payments and any other money (such as dividends) earned on a CTF are free of tax.
Children received an additional £250 on their seventh birthday. Lower income families could have received up to £500. The bonus paid at age seven was stopped for those who had reached that age after 1 August 2010. Importantly, the CTFs already in existence – approximately 6 million – were allowed to continue, but without further government contributions. Family and friends could also top up the account.
No money can be withdrawn from the CTF until the child reaches the age of 18, although children can legally take control of their CTF when they reach 16 (becoming the “registered contact”). The first CTFs will mature in September 2020. The last CTFs will mature in 2029.
What happens at 18?
Shortly before the child reaches 18, the account provider will write to him/ her setting out the value of the account and options on maturity. At 18, CTF account holders will be able to take the money as cash, invest it in an ISA or a mix of both. Only they can give instructions. It is therefore important for the contact details of the CTF account holder to be up to date.
Those who do not respond to their account provider will have their funds rolled over into a protected account, either to an ISA or to a product called a matured CTF. Both are tax-free accounts. Funds will be held in these accounts until the holder gets in touch.
Lost Child Trust Funds
If you know the name of your CTF provider but have lost the details, you can find out how to contact them here.
If you do not know the name of your CTF provider, HMRC will help you. You will first of all need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you fill in the online form. Click here for more information on the Government Gateway.
HMRC has a comprehensive section on CTFs. Click here for access. Note it has not yet been fully updated on options at 18.
In October 2010 the Treasury announced a new tax-free children’s savings account, the Junior ISA, which aimed to replace the Child Trust Fund. The Junior ISA was launched on 1 November 2011. Further information can be found in our Junior ISA Factsheet, linked to below.
The annual subscription limit for Child Trust Funds and Junior ISAs for the 2019/20 tax year is £4,368. The annual subscription limit for Child Trust Funds and Junior ISAs for the tax year 2020/21 will be £9,000.
Junior ISAs - BSA Factsheet
Transfer of CTFs to Junior ISAs
On the 23rd December 2013 the government announced that transfers from CTFs to Junior ISAs would be allowed from the 6th April 2015 onwards. Further information can be found via the link below.
CTF transfer to Junior ISA announcement