A Quick Guide to Child Trust Funds

We all want to give our children the chance to thrive, which means helping them prepare for their financial future.

You or your child might already have more savings than you are aware of, in the form of a Child Trust Fund.

What Is A Child Trust Fund?

In 2005, the British Government began investing money on behalf of every child born on or after the 1st of September 2002, in order to encourage long-term saving and ensure every child has a tax-free savings account by age 18.

This investment is called a Child Trust Fund, and these funds can be held in either cash accounts or in stocks and shares, like those offered by Sheffield Mutual.

Throughout this article, we will be answering some of the most common questions about Child Trust Funds, including:

• Who has a Child Trust Fund?

• How much money was invested in my Child Trust Fund?

• Can I add money to my Child Trust Fund?

• When can I access my Child Trust Fund?

• What happens when I turn 18?

• What if my parents didn’t redeem my Child Trust Fund voucher?

Who Has A Child Trust Fund?

Almost every child in the UK born between the 1st of September 2002 and the 2nd of January 2011 was given a Child Trust Fund voucher. After 2011, Child Trust Funds were replaced by the creation of the Junior ISA (JISA).

So if you were:

• Born between 01/09/2002 and 02/01/2011

• Born in the UK

and

• Your parents had an active claim for child benefit

Then you will have a Child Trust Fund account.

The first of the children allocated with Child Trust Fund accounts started to mature in September 2020 and will continue until 2029.

How Much Money Was Invested In My Child Trust Fund?

For children born between 2002 and 2010, the government contributed an initial value of £250. 

After 2010, due to changes in government regulation, this value was reduced to £50.

Eventually, the Child Trust Fund was removed entirely and replaced by the Junior ISA. No contributions were made to the Junior ISA by the government and, unlike Child Trust Funds, not every child will have one. 

Can I Add Money To My Child Trust Fund?

Like a Junior ISA, Child Trust Funds can receive investments of up to £9,000 a year.

However, unlike JISAs and other investments, the contribution allowance for a Child Trust Fund runs from birthday to birthday, instead of financial year to financial year.

Anyone can contribute to a Child Trust Fund, not just a child or their parents, so grandparents, godparents, aunts, uncles and family friends can all contribute.

Sheffield Mutual’s Stocks & Shares Child Trust Fund is a stakeholder account, meaning that the fund's value is tied directly to stock market performance. This does give you the chance to increase your fund value, but could also result in you receiving less money than has been paid in.

When Can I Access My Child Trust Fund?

When a child turns 16, they can take control of their Child Trust Fund by contacting the company that holds the funds and becoming the registered contact on the account.

However, the recipient of the trust fund still won’t be able to access the funds themselves until they turn 18.

What Happens When The Child Turns 18?

When a Child Trust Fund recipient turns 18, they have a few different options for accessing their money. When they turn 18, they could:

• Access the cash: At 18, the Child Trust Fund owner can withdraw their investment's full cash value into their own account.

• Invest in an adult ISA: Continue to enjoy tax-free returns, with access to money when it is needed, by investing all or part of the funds into our adult Investment ISA.

• Transfer it somewhere else: If you want to convert your Child Trust Fund into an Adult ISA but want to move it to a different bank or service provider, you can transfer the value of your Child Trust Fund into an ISA with another provider.

• Keep the funds in a matured account: If you aren’t quite sure what to do with your Child Trust Fund, you can leave the funds in a matured account. However, if you do this, it’s important to know that you cannot make any further contributions to the fund until it is either reinvested, transferred or withdrawn. If you haven’t decided what you want to do with the fund, you are able to access some of the value while leaving the rest invested. It is important to understand that by leaving the money invested, the value can fall as well as rise. 

What If My Parents Didn’t Redeem My Trust Fund Voucher?

You don't have to worry if your parents didn’t redeem your trust fund voucher.

The government allocated providers for unredeemed Child Trust Fund Vouchers, so even if you or your parents didn’t ask a financial provider to open an account, an account will have been opened for you.

You may have seen recent news articles about unclaimed Child Trust Funds. To find where your Child Trust Fund is being held, there is an online service designed to help you track down any funds that you were not aware of.

Manage Your Child Trust Fund With Sheffield Mutual

If you have a Child Trust Fund, consider moving this fund to Sheffield Mutual either as a JISA or as an adult ISA once you are over 18. Alternatively, if you are still under 18 and want to move your trust fund to a different provider, you can transfer your existing Child Trust Fund to Sheffield Mutual’s Child Trust Fund, so it will be ready for you when you turn 18.

If you still have questions about your Child Trust Fund or want to discuss​​ your options, contact one of our friendly staff members by calling 01226 741 000.

Tax treatment depends on individual circumstances and may be subject to change in the future.

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has not offered any advice. If you doubt whether a savings or investment plan is suitable for you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.