Child Trust Funds

The Child Trust Fund (CTF) is a long-term, tax-free savings account for children which ran between 2002 and 2011. A July 2023 report by the Public Accounts Committee found that over 40% of the matured accounts have not been claimed, totalling £1.7 billion.

This is a freeview 'At a glance' guide to Child Trust Funds.

The Child Trust Fund (CTF) is a long-term, tax-free savings account for children which ran between 2002 and 2011. Existing CTFs can still be used.

At a glance

• Child Trust Funds (CTFs) were offered for children born between 1 September 2002 and 2 January 2011, with the money accumulated only accessible when the ‘child’ reached 18 years old. 
• Since 1 September 2020, people turning 18 have been able to withdraw money from CTFs for the first time or continue to use the tax-advantaged wrapper, free from both income and Capital Gains Tax.
• Children born between the years 2002 and 2011 each received free cash vouchers of up to £250.
• A further £250 was added when the child reached the age of seven. This voucher was worth £500 if you were on a low income.
• These state grants were invested in an authorised CTF.
• Like an Individual Savings Account (ISA) the contributions can be invested in either cash or investment accounts. 
• Additional payments could be made by family and friends within yearly limits. For 2022-23 and 2023-24 up to £9,000 p.a. can be contributed to a CTF.
• The first recipients of CTF vouchers turned 18 in September 2020 and may access the money for the first time. They may take control of their account e.g. make investment decisions from the age of 16.
• HMRC notes that many parents and children are unaware of how to access these accounts.

Public Accounts Committee report

The Public Accounts Committee (PAC) took evidence from taxpayers and questioned HMRC about the lack of public engagement with trust funds and the resulting large number of people who have not taken money out of their funds.

The PAC reported in July 2023 that "following a failure in long-term planning by HMRC", which set up the accounts, an estimated 42% of 18-to-20-year-olds have not claimed the savings in their matured accounts. This totals £1.7 billion.

The Committee also reported that while providers are charging fees for passively managing CTFs, many are not doing enough to link up forgotten accounts with their owners. Only four providers, out of around 55 in total, have proactively and voluntarily worked with the Tracing Group, a commercial service for tracing the owners of dormant accounts. Providers could be collectively earning up to £100 million per year through charges on CTFs. 

What happens now?

For those people who have already turned 18, there are several options.

• The full value of the CTF can be cashed in only by the holder of the account.
• The CTF can be maintained. Up to £9,000 p.a. can be added. This amount is subtracted from the full annual ISA allowance of £20,000 p.a. should the individual also have a separate ISA.
• The holder can transfer the CTF to another provider offering either a cash or investment wrapper.

For those whose children are yet to reach 18:

• The holder of the CTF can take over the management of the product when they reach 16. Primarily this means transferring to another CTF provider or changing the investment structure from cash to investment products.
• From 6 April 2015, CTFs can be converted into Junior ISAs. 
  • Junior ISAs are similar in structure to the CTFs but are likely to offer higher cash interest rates and a greater number of providers.

Can't find your CTF?

A major concern articulated when the first tranche of eligible teenagers turned 18 was that the accounts had been lost. Often this has been a result of when a family moves home and forgets to update their CTF provider with their new address.

This is easily rectified using HMRC's online form to enquire where the account was originally opened.

• Go to HMRC's tool. Log in using a '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 respond within three weeks with details of the account. HMRC may need further information and will contact you.
• Contact the CTF provider and access the account.

Useful guides on this topic

ISA guide
What is an ISA? What are the limits? How are ISAs taxed?

ISA limits
What are the Individual Savings Account (ISA) investment limits? How much can I invest in an ISA each year?

IHT: Gifts
What are the Inheritance Tax (IHT) implications of giving away assets? What exemptions and reliefs are there for gifts?

External links

House of Commons Committee of Public Accounts, Child Trust Funds

GOV: Child Trust Funds

GOV: Find a Child Trust Fund