Child Trust Funds

What is a Child Trust Fund?

The Child Trust Fund (CTF) is a long-term tax-free savings/investment account for children born between 1 September 2002 and 2 January 2011. All children within this age range have a CTF set up under Government arrangements, which included an initial payment of £250 or £500 for most children from the Government.

As the centrepiece of the Government plan to encourage asset-based welfare, the objective was to establish a savings habit among children: providing a cushion of financial assets as they embark on adult life, and enabling them to be confident in the management of their finances. The scheme was designed to be both universal and progressive, so it not only applied to everyone but provided more to those who had less.

An adult in a position of parental responsibility called the Registered Contact acts on behalf of the Child to make sure that the account is properly invested and operated: the account itself is held with a CTF Provider.

The money in the CTF account belongs to the child but can't be taken out until they are 18. Family and friends can add money to the account up to a current limit of £9,000 a year, a limit which runs between birthdays. There is no tax to pay on any income or gains within the account.

There are three types of CTF account: the account type was generally selected at opening, although some may have been transferred over the years:

Stakeholder Investment Accounts: opened either by parents or by HM Revenue & Customs if an account had not been opened for a child within one year of birth, these are designed to a set Government standard in respect of both investment style and charges. Due to stockmarkets which have generally risen over recent years, account values have typically seen a significant increase.

Non-Stakeholder Investment Accounts: opened by parents who wished to take a more active or individual approach to investment potentially on a self-select basis, these accounts did not have to follow the Stakeholder standards, but will generally have seen a significant increase in account values, which often benefited from additional family contributions.

Non-Stakeholder Cash Accounts: following representations from banks and building societies, non-Stakeholder cash accounts were opened by parents who preferred a savings deposit structure. There will have been limited increase in account values for these due to very low interest rates since 2009.

Although the Government is no longer making payments to this account, CTFs already in existence continue to operate and to be open to voluntary contributions. Since April 2015 the Government has permitted the transfer of CTFs into Junior ISAs (but not vice versa).

Our ‘Facts and Figures’ page sets out the numbers of accounts for each account type, in each region. Meanwhile details and contact numbers for the providers who established HMRC-allocated accounts can be accessed here.

Access and Control

A young person is permitted - but not required - to take control of their Child Trust Fund from their 16th birthday. This means that they can switch the account to another provider, change the account type or select investments if they so wish. However they cannot withdraw the funds until their 18th birthday.

As accounts approach this stage, account providers may seek instructions on what action should be taken. The choice will generally be to transfer the account into an adult Individual Savings Account, or to withdraw the money at 18. Each of these choices will require a positive instruction.

If no instruction is received by the young person’s 18th birthday, or if the account is ‘Addressee Gone Away’ (this applies to over one million accounts out of the six million issued), the account will be placed in a ‘Protected Account’ which may be a ‘Matured CTF’ or ISA, and locked down subject to the provider’s terms and conditions. It is therefore strongly advisable to take action before the young person’s 18th birthday.