June 12th, 2023
How to access your child’s forgotten Child Trust Fund – and 3 ways they can use it
If you are a parent or grandparent, the future prosperity of your children or grandchildren is likely to be at the top of your priority list.
Their mental wellbeing, educational success, and financial stability may all be things you are helping them work towards as they grow up. When it comes to their money, your children might already have savings accounts that they pay into regularly, or you may have opened one or multiple accounts on their behalf.
One often-forgotten account that could add to their future success is the government’s former Child Trust Fund (CTF) scheme. This scheme ran between 2002 and 2011, and could help your child get a head start as they enter adult life.
Read on to find out whether your child is likely to have a CTF, what it could be worth today, and how you and your child can access these funds.
Children born within a 9-year period benefited from a £250 government investment
The CTF scheme was introduced as part of a Labour government scheme that aimed to encourage parents to save for their children’s futures.
Under the scheme, parents of children born between 1 September 2002 and 2 January 2011 were provided with a £250 voucher, or £500 for low-income families, with a view of it being placed in a tax-efficient investment account. As the parent, you could decide which bank or building society with who to invest your child’s voucher. If the voucher was not used within 12 months, the government would usually set the CTF up on the child’s behalf.
These funds have been left to mature since birth. Your child can assume management of the account at age 16, but withdrawals are only possible when they reach 18.
When your child turns 18, the fund will mature. From then, it will remain in a protected account and benefit from tax-free interest, but it will no longer be invested. At that point, there are multiple options your child can take – something you will read about later in this blog.
Importantly, after spending years sitting in an investment account, the government’s investment could be worth a substantial amount today.
Indeed, HMRC data reported by Which? reveals that the average CTF that has already reached maturity stands at £2,100.
Investment growth will vary from person to person, depending on various market factors – but whatever the sum, this injection of cash could be of great use to young people starting out at university or joining the world of work.
Sadly, many young people and their families have lost track of their CTF, or simply don’t know it exists at all. The National Audit Office (NAO) reports that as of August 2022, more than a quarter (27%) of CTFs that had matured at least a year beforehand remained untouched by the account holder.
You or your child can request their Child Trust Fund information using the government website, or by contacting the provider directly
Finding out about a CTF is a simple process.
If you know who your child’s fund provider is, you can contact them directly for an account summary, to add money, or to cash in the funds (more on this later).
If you’re not certain where the account is held, you can fill in the form on the government website to find the provider. To do so, you need to enter your child’s National Insurance (NI) number and other relevant details.
You may then receive a letter within a few weeks of filling in the form, stating the account’s current value and your available options.
Young people over 16 can go through this process themselves, but if they are underage, you can access this information on their behalf using your own NI number.
3 innovative ways your loved ones could use their Child Trust Fund to thrive in future
Once you or your child has accessed their CTF, the question on your lips might be: “what now?”
Here are three ways you and your kids could use their CTF in the coming years.
1. Boost the fund with additional capital before your child turns 18
As it ages, a CTF may continue to appreciate in value, even without you or your child investing further.
Crucially, as a parent or grandparent, you could also boost this initial investment in the years leading up to your loved one’s 18th birthday. As of 2023/24, anyone can contribute up to £9,000 a year into a CTF until the account matures.
Maximising contributions before this investment matures could create an even bigger pot that your child may benefit from down the line.
Remember: when your child turns 18, their CTF will sit in a protected account, benefiting from tax-free interest but not investment growth. At this point, your child could consider the following two options.
2. Cash in the fund’s value as it stands
As your child progresses towards adulthood, they may want to develop their financial independence.
So, they might wish to cash in the fund’s value now (if they are 18 or older) and decide what to do with it on their own terms.
Once they have control of the funds, your child could use the money to:
- Buy, or contribute towards, their first car
- Save up for university
- Help support themselves in an entry-level job
- Pay for once-in-a-lifetime travel experiences.
This injection of capital could prove life-changing for your child if they have short-term dreams and ambitions they wish to fulfil.
3. Place the funds in a new account once their Child Trust Fund matures
Thanks to the government’s initial £250 or £500 investment, your child could have a few thousand pounds sitting tax-efficiently in an investment account.
At this point, the fund will sit in a protected account until withdrawal, and your child will need to either transfer the funds into an Individual Savings Account (ISA) or cash in the money.
Unless your child wishes to cash in their fund upon maturity and use it to pay for immediate costs, it could be wise for them to transfer its value to another investment account until they need it.
By continuing to pay even a small amount each month into a Stocks and Shares ISA containing the value of their CTF, the returns your child sees could continue to be lucrative, and enable them to maintain a solid financial foundation for their future.
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This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.