‘I forgot about my son’s Child Trust Fund, what do I need to do?’
As the first 16-year-olds start taking control of their Child Trust Funds, many parents may have been reminded about holding the government savings product. Here’s what you need to know.
Child Trust Funds (CTFs) were available for children born between 1 September 2002 and 2 January 2011 as a way to save for their future.
They received a voucher worth between £50 and £500, depending on the household income, and an estimated six million children benefited from the government scheme.
This year is particularly important for children turning 16, as even though they own the accounts, they can take control of the funds, though they won’t be able to access the money until they reach their 18th birthday.
As Child Trust Funds have come to the fore, many parents may now be thinking about how to make the best use of them before kids take charge. And with between two and nine years before kids can access the estimated £10bn of savings, it’s important parents get to grips with the product.
OneFamily provides the following five tips for parents:
1) Find your child’s Unique Reference Number
Parents should check paperwork for anything that mentions their child’s Unique Reference Number as this will help them find out where the CTF is held. This will be on any documents relating to the trust fund. When a child turns 16 their Unique Reference Number becomes their National Insurance number.
2) Track down a lost Child Trust Fund
An estimated one million CTFs, worth around £1bn are missing or lost. If parents are unsure of where their child’s CTF is held, the best place to start is the Free find my Child Trust Fund Tool on the government’s website.
If you already have a government gateway login, you just need to go to the link and answer a few questions and enter a few details about the child and about the parents.
If you don’t have a government gateway login, you’ll need to set one up, giving details of your National Insurance number, date of birth, a payslip, P60 or passport to confirm identity.
Once an email address has been provided, HRMC allows for 15 days to get the information and respond to the parent.
3) Get to grips with the account
Whether a CTF has been lost or just forgotten about, once you’ve tracked it down, speak to the provider before making any changes. If the government invested a voucher on the parent’s behalf it will be in a stakeholder account, which means the money will have been invested rather than just saved in cash.
OneFamily’s own CTF data reveals that money in stocks and shares has returned 12.1% in a one-year period, 33.2% over three years and 60% over five years. A CTF voucher of £500 invested in 2005 would now be worth £1,000.
Anyone can pay into a CTF including the child themselves (up to £4,260 a year) and even small amounts can really make a difference in the long-term.
Parents will need to be mindful of charges/fees that come with investing, however.
4) Find out what happens when your child turns 16 and 18
When a child turns 16 they will be able to become the registered account holder of their CTF. As the registered account holder, the child will receive all communications about the product and they will be able to access any online account management that comes with the account and watch their money grow. They will also be able to decide where their money is saved.
When a child turns 18 they will be able to access the money. There are options when this happens, such as reinvesting and continuing to save towards future goals. Over a third of parents with similar accounts that have matured, such as Junior ISAs or Junior bonds, say their child has continued to invest.
5) Talk to your child about the account
Once a child has taken control of the account this can’t be reversed but that doesn’t mean you can’t still support and help them. If children are unsure they want to take control it is worth parents sitting down with them and explaining how their account works.
After all, one of the best ways to teach children about money is to tell them about it and involve them in the saving process. By showing them how it works and involving them in the process they can watch their money grow over time and understand the value of it.
Steve Ferrari, managing director of Child Trust Funds at OneFamily, said: “There is still the opportunity to earn money on these accounts. We are urging parents to continue to invest into these accounts and if they are unsure of what has happened to their child’s CTF, or who it was originally invested with, to track it down.”