Child Trust Funds

Child Trust Funds (CTF) were introduced in 2002 to encourage saving for children. Though they’ve since been replaced by Junior ISAs, those with existing accounts or vouchers get to keep their Child Trust Funds. Here’s more on how they work and information on how to transfer an account.

What is a Child Trust Fund and who qualifies for one?

Child Trust Funds were available to children born between 1 September 2002 and 2 January 2011 but have now been replaced by Junior ISAs.

Child Trust Funds are long term tax-free children’s saving accounts set up by the government to help make sure that every child that qualifies arrives at adulthood with a savings account. They can take over the account by contacting the Child Trust Funds provider.

If your child was born after 2 January 2011 or before 1 September 2002 (and is still under 18), or didn’t qualify for a Child Trust Fund, they can get a Junior ISA instead.

Even though this scheme has stopped, existing Child Trust Fund accounts can continue until the child is 18 and children who qualified for a Child Trust Fund are not eligible for Junior ISAs.

Anyone with money in a CFT can transfer it to a Junior ISA. The first CTFs will begin reaching maturity in September 2020, when the oldest holders start to turn 18.

On maturity, those CTFs can either be cashed in or transferred into adult ISAs.

Looking for more information? Read our guide to Junior ISAs

How a Child Trust Fund works

  • HM Revenue & Customs (HMRC) sent the parents or guardians of qualifying children a starting payment voucher of £50 or £250, depending on when your child became entitled to an account. This voucher could then be used to set up a Child Trust Fund account in the child’s name.
  • Money in a Child Trust Fund account belongs to the child and is ‘locked in’ until they turn 18.
  • There are three types of account that could be opened with the voucher:
  1. “Stakeholder” like a share-based investment account with a capped annual charge of 1.5% annually and allows you to pay in amounts from as little as £10.
  2. “Share based investment account” where you can leave contributions invested in stock market investments
  3. “Savings account” where you can leave any contributions in cash earning interest
  • With a CTF, there was no Capital Gains Tax or income tax on interest to pay on any profits made and. Also, the money your child gets won’t affect any benefits or tax credits you receive.

Family member payments to a Child Trust Fund

Parents, family members and friends can between them pay in up to £9,000 (2020-21) each year, with the child’s birthday considered the start of the year.

If you want to change the Child Trust Fund account that HMRC set up for you

If HMRC set up an account for your child, you can change to the provider or account of your choice at any time.

Be sure to ask providers about any fees charged for running the account. You should also ask about making further contributions. You can pay as little as £10 into a stakeholder account but some providers may require larger payments for other accounts.

Alternatively, call the Child Trust Fund Helpline on 0845 302 1470.

Should I switch my Child Trust Fund into a Junior ISA

While there is no requirement to transfer a Child Trust Fund into a Junior ISA it can work out better for your child’s savings in the long term. Junior ISA’s generally offer more choice and better value, whether it’s higher interest rates on their cash accounts or lower annual fund management charges.

This was because once CTFs were discontinued, financial companies tended to put more effort into attracting parents to Junior ISAs generally leaving those with CTFs with less investment choice and much steeper charges.

To find out more take a look at our Junior ISAs page.

Finding a lost Child Trust Fund account

You can find out where a lost CTF that was set up for you is held even if you don’t know the provider.

Go to the GOV.uk website and fill in the HM Revenue and Customs (HMRC) formopens in new window. This tells HMRC to check where the account was originally opened. You’ll need a Government Gateway user ID and password. If you don’t have a user ID, you can create one when you fill in the online form.

HMRC will send you details of the Child Trust Fund provider by post within three weeks of receiving your request.

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