Child Trust Fund Print

The Child Trust Fund (“CTF”) provided each child born between 31 August 2002 and August 2010 with an initial payment of not less than £250. The payment was made by HM Revenue & Customs by way of the issue of a voucher which was used to open a CTF with a provider of the parents’ (or responsible person’s) choice. Providers offered various different accounts, including cash deposit accounts, unit trusts, and life products. In addition, each provider had to offer a stakeholder account. These are equity based and risk controlled, with low management charges.

Although government payments into CTFs ceased in 2011, parents, family and friends, as well as the child may still contribute into the CTF. For 2020/21 and 2021/22 a total of £9,000 may be paid into the CTF each year running to the child’s next birthday. Where the contribution is from a parent, the income arising is not taxed on the parent. All contributions must be in money and cannot be any other asset.

All income and capital growth within the fund is exempt from tax. The fund will only be accessible by the child on attaining the age of 18. Parents are not able to access the fund during the child’s minority. The only withdrawals allowed from the account prior to the child becoming 18 are the account provider’s management fees, or where the child is terminally ill, or dies before attaining the age of 18. Once the child has become 18 he is entitled to the fund, and although the Government’s intention is for it to be used for education, or the setting up of a home, or business, there are no restrictions on how the money may be used.

A CTF may be transferred into a Junior ISA. A child can have both a Stocks & Shares and a Cash Junior ISA, whereas the child could only have either a Stocks & Shares CTF or a Cash CTF. Accordingly the Junior ISA may provide additional flexibility over the investments held. In addition, because CTFs are no longer available, it is likely that Junior ISAs will offer a better return as there is greater competition, and generally fees are lower for Junior ISAs. If your child has a CTF then you should consider transferring this into a Junior ISA. It is however recommended that you seek professional advice before proceeding with a transfer.

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