We’ve all been there. Having that sense of panic that you’ve misplaced something, and it’s gone forever, whether that’s a Child Trust Fund or your car keys, it’s not a nice feeling.
Luckily for you, tracking down and finding a lost Child Trust Fund could be a lot easier than ripping the house apart to search for a wallet that’s gone walkabout.
What is a Child Trust Fund?
Before you do anything else, it’s a good idea to check if you actually ever had a Child Trust Fund (CTF).
The CTF scheme, launched in 2005, automatically gave each child born between 1st September 2002 and 1st January 2011 an account worth between £250 and £500, based on the family income. Child Trust Funds were replaced by Junior ISAs from 1st January 2011.
How much is in there depends on a huge number of factors. For example, parents were given the option of choosing a cash CTF or a stakeholder or shares CTF. If you chose the former, you were likely to earn up to 2% interest on your child’s savings1. Contrastingly, the investment option saw large increases in popular indices – like the S&P 500 – since 20052, which could have significantly increased your savings. And maybe you, or other family members, also contributed to these savings.
Either way, any UK citizen born between these dates will have something saved for them – even if you don’t know how much or where it is.
How to Find a Child Trust Fund
We mentioned it earlier but finding your lost Child Trust Fund isn’t as difficult as you may think. In fact, it’s just two steps, but you must be the parent or registered guardian of the child.
As all CTFs were initially opened with HM Revenue and Customs, you will need to log in using your Government Gateway credentials. These are the details you need to access the government website, but don’t worry if you don’t have them, or can’t remember what they are – you can easily register here, or click the “forgot my password/user ID/password and user ID” links. Once in, you’ll find an online form to request details of your Child Trust Fund provider. You’ll need to fill this in with some personal details of you and your child.
Then, within 3 weeks, you’ll receive a letter from the HMRC telling you exactly who your CTF provider is.
It really is as easy as that.
But it brings about the question:
What do I do with my Child Trust Fund?
Since the rules have finally changed, parents are now able to move their child’s CTF money to other providers. Up until April 2015, you couldn’t do anything with an existing CTF.
This is probably a significant factor that contributed to so many people losing track of their Child Trust Funds. Four years passed between closing the scheme and being able to do anything with it. So, it’s not just you who lost track. According to the HMRC, between 400,000 and 800,000 CTFs valued at £1,600 have been lost3.
But you now have a couple of options available to you here.
As you already have a Child Trust Fund, you could continue to add money to it. Currently, you can add the same amount as a Junior ISA - up to £9,000 a year (subject to change). But, unlike a Junior ISA, the year runs between your child’s birthdays. This means that, for example, you could add £9,000 when they are 8 and then this limit resets on their 9th birthday. If you don’t use the whole allowance, it disappears and can’t be carried forward.
Alternatively, you could choose to transfer a CTF to a Junior ISA. And you don’t have to stick with the option you chose when you opened the CTF. So, if you initially picked the cash option, but would rather open up the potential of stocks and shares, then you can transfer to a Junior Stocks and Shares ISA.
Why move a Child Trust Fund to a Junior ISA?
Child Trust Funds and Junior ISAs offer the same tax perks and have the same annual allowances. So why switch?
Since the cancellation of CTFs, interest rates have generally been less competitive4 than other child savings accounts, and some of the CTF providers’ investment management charges crept up. Both of these could diminish the returns seen on your child’s savings.
Robo-investors, like Wealthify, offer even more benefits with low management fees and a wide range of investment styles and even Ethical Plans that allow you to invest in companies who aim to have a positive impact on the environment and/or society. There’s an array of options available to you, with many providing better rates4, improved benefits, or lower fees and make transferring out of a CTF quite appealing.
There are also ease-of-use benefits, such as online access and dashboards that allow you to keep track of your child’s savings or investments.
How do you transfer a Child Trust Fund to a Junior ISA?
Great question – we’ve told you that you could do it, and why you might, now here’s how you do it:
You can transfer a Child Trust Fund to a Junior ISA as long as the child is still a UK resident and is under 18, you can still transfer out even if they have a £nil balance. It’s worth finding out if your Child Trust Fund has any exit fees you’ll have to pay, if these costs are high then it may outweigh the benefits of switching.
It’s worth noting that your child can’t have a CTF and a Junior ISA at the same time – so, you’ll have to move all the money in that account. This process will also close the Child Trust Fund, which will not be able to be reopened unless the transfer is unsuccessful.
Before making any transfer, make sure you compare Junior ISA providers to find the best kids ISA.
To start the transfer, you (provided you’re the registered guardian) will need to complete a transfer form with the provider they have chosen to move to. For example, if you decided to move your Child Trust Fund to Wealthify’s award-winning Junior ISA, then you would need to complete the transfer form which is included in our sign-up journey.
The new provider will then talk to your CTF provider and start to carry out the transfer which, all going well, will take up to 30 days.
1 https://www.thisismoney.co.uk/money/saving/article-1587114/Best-savings-rates-Child-Trust-Funds.html - up to 2% calculated using an average value of the interest rates provided by the 9 Child Trust Funds on this list (rounded from 1.968). Correct as of 29/01/2020
2 https://www.macrotrends.net/stocks/charts/SPY/spdr-s-p-500-etf/stock-price-history
4 https://www.moneysavingexpert.com/savings/junior-isa/ Junior cash ISA interest rate at 3.6% compared to best available CTF rate of 2.65%
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Past performance is not an indicator of future results.
