First 16-year-olds to benefit from child trust funds come of age

Young people to get a savings windfall from this month – and many don’t even know it!

The child trust fund (CTF) celebrated a landmark birthday last weekend weekend, as it is now 16 years since former chancellor Gordon Brown launched the tax-free savings vehicle.

The CTF may have been superseded by the Junior Isa, but this key anniversary is well worth marking, because more than six million children now hold cash and shares inside a trust.

The first CTF holders will have turned 16, which means they can start managing their own accounts, although they cannot withdraw the money until age 18.

At that point some could have many thousands of pounds at their fingertips and parents and grandparents should plan ahead to make sure they can be trusted with it.


Every British child born between September 1, 2002, and January 2, 2011, was eligible for a CTF, with those born afterwards having a tax-free Junior Isa instead.

CTFs were designed to give children a cushion of cash at the start of their adult life, and teach them how to manage their money.

The government originally topped up the accounts with a £250 voucher, then another £250 on their seventh birthday, doubled to £500 for children in low-income households, although these payments were later cut.

Parents, family and friends can now add a total of £4,260 a year, with all money free of income tax and capital gains tax. An estimated £10 billion is held in CTFs, with the average child born in 2002 having £2,175, according to OneFamily.

The savings provider manages one in four CTFs and has delivered an investment return of 108 per cent over 16 years. Managing director Steve Ferrari said the scheme has between two and 11 more years to run, so parents should carry on investing: “There is still the opportunity to earn money and give your children a healthy nest egg for their future.”


This month alone 75,000 beneficiaries will turn 16 and can apply to their provider for a form to make them the registered account holder. Ferrari added: “Once updated, the child will receive all future communications, and can manage their money online and watch it grow.”

Sarah Phillips, a tax partner at Irwin Mitchell Private Wealth, said some fortunate children could have as much as £50,000 in their account: “This could provide the means for a house deposit, money to start their own business or fund higher education.”

However, many parents will worry that their child will fritter away their good fortune. “Discuss what they plan to do with the money and offer guidance on investment options,” Phillips said. “Learning how to make sensible money decisions will give your children valuable experience, which will help them handle their money in future.”

One option would be to switch the CTF into a Junior Isa which will automatically turn into an adult Isa at age 18, giving them more investment options. “It’s worth teaching your children the right way to invest,” she added.


Gavin Oldham, chairman of The Share Foundation, said many teenagers may not know that they have an account, because their parents did nothing when they were born, but the money is still there for them.

Of the 6.14 million accounts, some 1.74 million were opened by HMRC on the child’s behalf. Even accounts that were never topped up could contain sizeable sums from the Government contribution and growth.

Oldham called on the Chancellor Philip Hammond to take action to reconcile lost accounts in the Budget in November, many of which belong to the poorest children: “We need to make sure the CTF boosts financial capability for all young people, including the most disadvantaged.”

To track down a child trust fund parents can use the HMRC’s dedicated page. Parents will need to provide both their own information as well as that of their child, and once it has been submitted they should receive the information on where the child’s child trust fund is held within 15 days.

What about everyone else?

Child Trust Funds no longer exist however children born after January 2, 2011 can open a Junior ISA (JISA) instead – although without the Government voucher to kick-start savings.

Families with existing Child Trust Funds can transfer the funds into a Junior ISA.

Because Child Trust Funds are no longer being opened, the market is uncompetitive and you can get better rates with a JISA.

Coventry Building Society pays 3.5% on its JISA, Nationwide 3.25% and Tesco Bank 3.15%. That’s compared to the best CTF rate of 2.65% from Skipton Building Society.

Visit MoneySupermarket for a comparison of all Junior ISA’s available.


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