Is your child reaching the age of 18? If so, they could be amongst a huge swathe of teenagers set to cash in on their Child Trust Funds for the first time. Set up by the Labour government in 2002, the scheme aimed to encourage parents to save for their children’s future, with the money only accessible at the age of 18.
Under the scheme, the government contributed £250 when a child was born and an additional £250 when they were seven years old (£500 for lower-income families). Although the programme was phased out in 2011, the first of the Child Trust Fund (CTF) generation have reached adulthood and are able to access their savings pots, which could now be worth over £1,000 – or tens of thousands in some cases where parents have made maximum additional contributions.
What happens now?
In advance of the child’s 18th birthday, your CTF provider should contact you before the account matures, to outline your options.
These may (depending on the provider) include withdrawal, transfer to an adult ISA in their name or transfer to an equivalent account which retains its tax-free status, so savers can continue to benefit from the interest whilst they decide what to do with it.
Many don’t know they have one
Of the 6.3m children with a CTF waiting for them, nearly a third (1.8m) may not even know they have an account, according to HMRC estimates1. So, how can you find out if your child has one? Well, all you need is their National Insurance number and you can fill in a form to find out where the account is located. Just visit: www.gov.uk/child-trust-funds/find-a-childtrust- fund.
In the driving seat
There are many potential homes for the maturing CTF money. The most important thing is not to panic, to have a plan and properly take the time to think about what you want to do with the money long-term.
If you would like advice on how to make the most of your potential windfall, we’re here to help – just get in touch, we can talk through your options with you.
1 HMRC, 2020