Parents of children born between September 2002 and January 2011 were given £250 for each child by the Government (£500 for parents on low incomes) to invest in a Child Trust Fund, with a further payment made on the child’s 7th birthday. The money belongs to the child but can only be accessed once they reach age 18. Its aim was to support higher education, but no restrictions were put on its use.
There was a choice of cash, stakeholder or shares-based funds, with any interest, dividends or capital gains free of tax. Parents, family and friends could also contribute up to the set limits.
What happens at 18?
In September last year, the first of these children turned 18 and can now access their money. If no action is taken, Child Trust Funds (CTF) are automatically rolled into an ISA by the provider, although this doesn’t affect normal ISA allowance. Interest rates and investment choices for the ‘rollover’ ISA are generally limited, but the funds can be transferred to another cash or stocks and shares ISA provider.
If your child is under 18
Up to £9,000 can be paid into the existing fund each year or you can convert it to a Junior ISA. We often find that CTFs have limited investment choice and need to be converted to Junior ISAs to access our preferred funds. If you’re not sure if your child has a CTF or you can’t find it, the Share Foundation’s tracing service can help.
Go to https://findctf.sharefound.org