Misconceptions of the Child Trust Fund (CTF): Fact or Fiction
According to Gov.uk, more than 670,000 18 to 22-year-olds are yet to claim their Child Trust Fund (CTF). Here at Unity Mutual, we have managed over 340,000 CTF accounts on behalf of our customers since 2009.
But what is a Child Trust Fund? How do you know if you have one? Or perhaps you have a child who was eligible and you’re wondering how you can access the funds?
There can often be some confusion on how to understand the rules around the account, but we’re here to help.
Our team has used the knowledge from more than 38,000* CTF related calls this year to break down those common misconceptions.
* Call data: 1st January 2024 - 18th November 2024.
1#: You can still open a Child Trust Fund
Answer: FALSE
The Child Trust Fund was a government savings scheme launched in 2005. It provided children born between 1 September 2002 and 2 January 2011 with an initial contribution for a tax-free savings account.
If you applied on behalf of your child(ren) – via a voucher given to you by the government – you could choose a provider. If a voucher expired, a CTF provider would have been allocated on your behalf.
And whilst you can still add up to £9,000 per year to an existing account, you can’t open a new CTF account. If you want tax-free savings for your child, the Junior ISAs have replaced the old scheme. However, there is no initial government contribution.
2#: Who can access the money in a Child Trust Fund? It’s the parent isn’t it?
Answer: FALSE (but as a parent you do have the option to transfer…)
Whilst a parent or guardian may have opened a Child Trust Fund on behalf of their child (or one will have been opened on their behalf), a Child Trust Fund will be linked to the child's National Insurance number*.
So, it is the child that owns their fund, and they are the only ones that can access the money in their account when they turn 18**.
*Sometimes referred to as a Unique Reference Number.
**There are certain circumstances where the fund would be released to a parent or guardian e.g. terminal illness or mental incapacity, so please speak to the Unity Mutual team if you think this would apply to you.
3# My government Child Trust Fund will be worth £2,000
Answer: IT COULD BE - But the amount will vary
The value of the Child Trust savings account can vary substantially – and the value may not always match your (or your child’s) expectations. Whilst the BBC states that ‘the average amount in Child Trust Funds is estimated to be around £2,000’, this is not always the case, but why not? Well, it depends on various factors including:
- Government Contribution: The initial government contribution for a CTF – will have varied from £50 to £1,000, depending on various factors such as the child's birth year.
- Other Contributions: Parents, guardians, family and friends were able to contribute to a CTF and can continue to pay into the account (up to £9,000 a year) until the child turns 18. If additional contributions were made, the account will have benefited from a larger investment over time.
- Type of CTF: There are two types of fund; which one you or your child has will depend on the provider. The two types are:
- Cash based: With cash CTFs, growth will be in the form of a bonus or profit share; usually provided by banks and building societies these offer the child no risk, but the returns can be lower than other types of investment.
- Stocks or Shares: With a Stocks and Shares CTF, the investment tracks the stock market. This means the returns have the potential to outperform the average savings rate over time, but a Stocks and Shares ISA is subject to market risks, and returns can vary and can never be guaranteed.
4# I have to visit the original bank or provider to access a Child Trust Fund?
Answer: IT DEPENDS
Whilst it’s recommended that you contact the original provider of the fund, it may not be possible to. You may find that providers have closed down, and their accounts have been transferred. For example, Unity Mutual has taken responsibility of the following providers’ CTF accounts: Schoolteachers, Druids Sheffield, Kingston Unity and Nottingham Friendly.
Find out more about tracking down your CTF below.
5# I need to pay to track down a lost Child Trust Fund; is that right?
Answer: FALSE
Be wary of companies offering to locate and or manage your Child Trust Fund for you, as there are likely to be fees and charges. There are two free and trusted services available:
- The government offers a completely free and easy-to-use online service to help people locate* a lost Child Trust Fund accounts; many people manage their Child Trust Funds themselves.
- The Share Foundation uses the CTF register operated by The Tracing Group to support young people find their account.
If you believe your Child Trust Fund is with Unity Mutual, you can rest assured that you will not face any fees or charges for accessing your account.
Financial advice can be helpful, though, if you have contributed significantly more to the government savings scheme and you’re looking to reinvest. In which case, we recommend unbiased.co.uk, for finding independent and qualified financial advice.
*Locating a lost Child Trust Fund with gov.uk can take 3-6 weeks.
6# I’m adopted, will I still have a Child Trust Fund?
Answer: YES
Child Trust Funds were allocated to the majority of children born in the UK between 1 September 2002 and 2 January 2011. If a child entered care or was adopted, they will still have a Child Trust Fund. However, the Share Foundation may be the registered contact.
7# I have to close my Child Trust Fund when I turn 18
Answer: TRUE - But there are other savings options available
At 18, the account holder can choose to transfer their funds to a new savings product, withdraw the funds entirely, or a mix of both. Whilst there are no financial penalties at Unity Mutual for leaving funds in their Child Trust Fund account, other providers may have additional fees and charges, as this BBC article ’My £250 Child Trust Fund is now worth only £12' explains.
We encourage our Child Trust Fund account holders to contact us as soon as they reach 18 to make sure their money is working as hard as possible for them.
Need more information on accessing your Child Trust Fund?
You can find more useful information here, as well as frequently asked questions about the Unity Mutual Child Trust fund and how it works. Alternatively, if you need help finding a Child Trust Fund, you can use the free Find a Child Trust Fund tool via GOV.UK.
Even though Child Trust Funds aren’t available for new accounts, you can still transfer an existing CTF to another provider. However, the funds from your Child Trust Fund will be moved into a Junior ISA, giving you access to updated savings options (terms and conditions apply).
If you’d like to transfer your Child Trust Fund to a Unity Mutual Junior ISA, you can simply complete a transfer request here, and we’ll do the rest.
Important: You may want to visit unbiased.co.uk if you’re looking for financial advice around re-investing when you turn 18. If you’re having trouble locating your fund, and you're being looked after by a local authority, please contact the Share Foundation, who support children in care with their CTF.
