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. The money would only accessible once the child reached 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 now reached adulthood and are able to access their savings pots, which could 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 while 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 estimates*. So, how can you find out if your child has one? Well, all you need is their National Insurance number. You can then fill in a form to find out where the account is located – click here.
In the driving seat
There are many potential homes for the maturing CTF money. The most important thing is not to panic. Make a plan and properly take the time to think about what you want to do with the money long-term. Speak to your Financial Adviser who can talk through your options with you.
WORDS Angela Davy-Makwana Dip PFS – Financial Planning Consultant