Winter 2020

Child trust funds grow up

The first Child Trust Funds (CTFs) have reached their maturity date, but many have been overlooked.

The first CTFs reached maturity on 1 September 2020, when their owners turned 18.

A government payment of at least £250 was made at birth to a CTF, for children born between 1 September 2002 and 2 January 2011. Thereafter government payments stopped. HMRC had to set up nearly 30% of the 6.3  million CTFs where a child’s parents had failed to open an account within 12 months of the issue of the government payment voucher.

The default opening process means that many people have lost track of their CTFs, particularly accounts that just received the initial £250 payment. This has prompted HMRC to set up an online tracing tool as part of its program to handle maturities which are currently running at about 55,000 per month.

A newly adult owner of a CTF has three options when they reach the age of 18:

  • Withdraw the CTF’s value.
  • Invest all or part of the CTF’s value in an ISA, without the payment counting towards the normal subscription limits.
  • Do nothing, in which case the CTF fund will be transferred to a “protected account” where it will
    continue to enjoy freedom from UK income tax and capital gains tax.

CTFs were effectively replaced by Junior ISAs (JISAs) from November 2011 – and there were no more government contributions. JISAs offer the same tax benefits as CTFs and in this tax year have a maximum contribution limit of £9,000. For advice on JISAs and maturing CTFs, please contact us.

The plans may have started out for minors, but their rules mean they are not child’s play.

  • The Financial Conduct Authority does not regulate tax advice. Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances. Tax laws can change. The value of your investment, and the income from it, 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. Investing in shares should be regarded as a long-term investment and should fit with your overall attitude to risk and financial circumstances.

In this issue:

» The importance of diversification

» The pandemic retirement conundrum

» State pension age now 66

» Focus on year-end planning

» Tax deadline in January

» Savers feel the pinch

» Scams on the rise

» News round-up