What happens to a Child Trust Fund at age 18?

In 2005, the UK government introduced Child Trust Funds (CTFs) to help parents save for their children’s future. The idea behind the scheme was to give all children a financial nest egg they could rely on by the time they reached 18.

You might be wondering what happens to the fund when the child turns 18. Here is everything you need to know.

How do Child Trust Funds work?

Child Trust Funds are essentially tax-free savings accounts available for children born between 1 September 2002 and 2 January 2011.

Under the scheme, parents and guardians received a voucher for £250 (or £500 for low-income families) from the government to set up an account for their children. If the voucher wasn’t used within one year, HMRC would set up a CTF for the child on the voucher holder’s behalf.

The scheme was scrapped in 2010 and replaced with junior ISAs. Existing Child Trust Fund accounts, are still operational and most likely continue earning interest or investment returns. At the moment, parents and guardians can continue to add up to £9,000 a year to a CTF account.

What happens to Child Trust Funds at 16?

When a child turns 16, they can legally take over responsibility for their Child Trust Fund. They can make decisions about the fund, such as switching to another provider or transferring it to a junior ISA. However, they can’t withdraw the money at this stage.

Those who don’t want to take over management of the fund can let their parents or guardians continue to manage the fund.

What happens at 18?

When the child turns 18, the Child Trust Fund matures and they are free to withdraw the money in the fund.

If the child’s contact details are up to date, they will be contacted by the provider just before their 18th birthday and asked what they would like to do with the money. Typically, there will be three options:

  1. Withdraw all the money invested in the fund.
  2. Transfer the funds into a cash ISA or a stocks and shares ISA and continue earning interest or returns while still enjoying protection from tax.
  3. A mixture of both – transfer some of your money into an ISA and withdraw the rest.

If the provider is not able to get hold of the beneficiary, or if they do not respond, the funds will be rolled over into a tax-free savings account and held there until they get in touch.

Could you have a CTF you are unaware of?

The first recipients of Child Trust Fund vouchers turned 18 in September 2020, meaning they were able to access their money.

However, it is estimated that as many as 1.9 million parents might have forgotten to invest the CTF vouchers for their children (with HMRC investing the vouchers on their behalf). Other parents might have cashed in the vouchers and opened CTF accounts for their children and then forgotten about them.

As a result, a good number of children who have reached or are about to reach the age of 18 may be missing out on windfalls worth thousands of pounds.

There’s no need to worry. There’s a way children, parents and guardians can track these lost or forgotten accounts.

  • Head over to the government portal and log in using your Government Gateway ID. If you don’t have one, you can create one.
  • Fill in your (or your child’s) details, including name, address, date of birth, phone number, and National Insurance Number.
  • HMRC should send you details of your CTF account within three weeks. If they need any further information, they will contact you.
  • Contact the CTF provider and access the account.

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