Junior ISA: Nationwide explain benefits of setting up account
Child Trust Funds were originally set up for children born between September 2002 and January 2011. They can have up to £9,000 saved into them a year and the money held within them will officially belong to the child being saved for. The money can only be taken when the child in question turns 18 but they can take control of the account when they turn 16.
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Today, the HMRC revealed that millions of teenagers are set to benefit for the first time from the money held in CTFs.
They detailed that since 2002 around 6.3 million CTF accounts have been set up, with roughly 4.5 million being opened by parents or guardians with the remaining 1.8 million being set up by HMRC themselves where parents did not open an account.
This could mean that some children may not know that there are accounts in their name and as such, are unaware that money is waiting for them.
From September 1, the oldest children affected by CTFs will turn 18 and be able to access their money.
READ MORE:ISA transfer warning: Providers may not accept your funds
Junior ISAs were launched to replace CTFs (Image: GETTY)
HMRC explained that around 55,000 accounts will mature each month beyond this and as such, they have created an online tool which can help young people find out where their account is held.
John Glen, the Economic Secretary to the Treasury, provided the following comments along with HMRCs announcement: “We want to make sure all young people can access the money which has been set aside for them, to invest in their future and continue a savings habit, as they turn 18.
“If you’re unsure if you have an account or where it may be, it’s easy to track down your provider online.”
This is important to note as it should be remembered that CTF accounts are not actually held by HMRC but are spread across various providers.
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HMRC have made the ability to hunt down CTF accounts easier by changing some of the rules associated with them.
They recognised that the online form that they provided to customers to trace their CTFs requires a level of identity verification that many 16 to 18 year olds will not have.
As such, they will now allow the children to access the form with just their National Insurance number.
For those who wish to continue adding money into a CTF, they’ll be able to do so by cheque, standing order or direct debit for stakeholder accounts.
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Savings or share accounts may have different methods for deposits and as such the holders will need to check with the providers.
Some children may be being looked after by local authorities and have had a CTF set up on their behalf.
These kinds of accounts will be managed by the Share Foundation who will:
- write to the child when they take control of the account
- change the type of CTF account and provider if necessary and write to the child to explain why the change was made
- send account statements to the child
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Junior ISAs can be opened by those who do not have a CTF but are looking to build up a nest egg for their children.
Junior ISAs can have up to £9,000 saved into them in the current tax year and the child being saved for must be under 18 and be living in the UK.
These accounts can be opened with a range of banks, building societies, credit unions, friendly societies and stock brokers.
Children can have either a cash or stocks or shares ISA but they’ll only be allowed to have one of each as a maximum.
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FAQs
You can access the money in your Child Trust Fund when you turn 18. Your provider will usually write to you a month or two before to ask what you'd like to do. Here are your main options: Move the money to a new savings account and carry on saving – see how to find the best savings account for more help.
How much is a Child Trust Fund worth in the UK? ›
There are strict rules to reduce financial risk, including: the diversity of investments, gradually moving money into lower-risk investments when the child turns 13 and capping charges at 1.5% a year. The total market value of CTFs in stocks and shares stood at £10.5 billion at April 2021.
Does everyone have a Child Trust Fund in the UK? ›
Child Trust Funds are long-term, tax-free savings accounts and were set up for every child born between 1 September 2002 and 2 January 2011, with the Government contributing an initial deposit of at least £250. Funds can be withdrawn once the account matures when the child turns 18.
How to withdraw money from a Child Trust Fund? ›
Once you're 18, the choice is yours. You'll need to log into your OneFamily online account where you can withdraw money either by bank transfer or by asking us to post a cheque. You also now have the option to move money into an ISA or a Lifetime ISA. If you've not yet decided, it's ok to do nothing!
What is the average trust fund amount? ›
While some may hold millions of dollars, based on data from the Federal Reserve, the median size of a trust fund is around $285,000. That's certainly not “set for life” money, but it can play a large role in helping families of all means transfer and protect wealth.
What is the biggest mistake parents make when setting up a trust fund UK? ›
The 4 Biggest Mistakes Parents Make When Setting Up a Trust Fund
- Not choosing the right Trustee. Choosing the wrong Trustee is a common mistake parents make. ...
- Not being clear about the goals of the Trust. ...
- Not including asset protection provisions. ...
- Not reviewing the Trust annually.
According to the latest figures from HMRC, the average balance of a CTF stands at £2,100 – but obviously you could have more or less than this. It'll depend on a couple of things... The type of account the money was in. Funds could be held as cash savings or investments.
Do you pay tax on a Child Trust Fund UK? ›
Paying into a Child Trust Fund
The money belongs to the child and they can only take it out when they're 18. They can take control of the account when they're 16. There's no tax to pay on the Child Trust Fund income or any profit it makes.
How long does it take to withdraw money from a trust fund? ›
It depends on the terms of the trust. It may happen quickly or it could take years or even decades to distribute. It's important to point out that the longer it takes to distribute the assets, the more money it will cost to keep the trust active since you must pay for maintenance and trustee fees.
Does USA have a Child Trust Fund? ›
The State Children's Trust Fund (SCTF) was established as a separate fund in the state treasury in 1983 for the purpose of child abuse and neglect prevention. The Legislature specified the Office of Child Abuse Prevention as responsible for administering programs and projects with the SCTF's annual allocation.
The Child Trust Fund scheme was introduced by the UK government to provide you with a pot of money when you reach 18 years of age and encourage you to develop a savings habit throughout adulthood.
How do trust funds pay out? ›
A distribution in cash calls for the trustee to liquidate the assets in the trust and distribute the resulting cash to beneficiaries. A distribution in kind calls for the trustee to distribute assets to beneficiaries without selling the assets.
How long does a Child Trust Fund take to transfer? ›
A Child Trust Fund transfer can take 30 days. How can I claim a CTF on behalf of a vulnerable child? If your child is unable to manager their own money, please contact our Customer Services Maturity team who will be able to advise you on the process and next steps, 0333 600 0333.
How to claim Child Trust Fund in the UK? ›
Find and reclaim a Child Trust Fund
- Go to HMRC's tool. You'll need to log in using a 'Government Gateway ID'. ...
- Fill in your (or your child's) details. Including name, address, date of birth, phone number and National Insurance number.
- You should hear from HMRC within three weeks. ...
- Contact the CTF provider.
With an irrevocable trust, the transfer of assets is permanent. So once the trust is created and assets are transferred, they generally can't be taken out again. You can still act as the trustee but you'd be limited to withdrawing money only on an as-needed basis to cover necessary expenses.
How to get money out of a trust fund? ›
Another possible way to get money out of a trust fund is to request a cash withdrawal. This would require putting the request in writing and sending it to the trustee. The trustee might agree. But that individual or entity must also fulfill their fiduciary obligations.
Can you have a Child Trust Fund if you were not born in the UK? ›
A child is eligible for CTF if they are: born after 31 August 2002; resident in the UK; and. the subject of a Child Benefit (ChB) award.
How do I access my CTF nationwide? ›
You can manage your account: • via our Internet Bank or Banking app • in branch. Please note: To use your new account and access your savings, you'll need to go into branch with some identification (ID) and your National Insurance number.
