Losing something is never a pleasant experience.
Well, maybe with the exception of those post-Christmas pounds, or losing yourself in a good book. But what about losing money? It’s a hard thing to swallow when it’s yours, but what about when the money involved belongs to your children?
“How much money could my children possibly have to lose?”
It’s a good question, and the short answer is up to £1,000 that was placed into a Child Trust Fund (CTF) by the Government: possibly without your knowledge. It is estimated that 900,000 CTFs lie dormant, generously stuffed with money belonging to the Nation’s youngsters.
How do you know if your child is one of the many with a CTF? And more importantly, how can they claim what is rightfully theirs?
How has this happened?
In their 2001 election manifesto, the Labour Government announced the Child Trust Fund, subsequently launching it in 2005. An initial subscription was provided in the form of a voucher for £250, with another £250 being supplied when the child turned seven years old.
Not all children were eligible however, with the following conditions in place:
- The child must have been born between September 1st 2002 and February 2nd 2011
- The family must be eligible for Child Benefit
Double payments were supplied to low-income families, giving children a possible total of £1,000.
An estimated six million children in the UK fit the criteria, and 900,000 accounts still hold cash and have never been accessed (Source: Gov.UK).
Does my child have an account?
Even if you don’t remember setting up a CTF, many accounts were opened by the Government on the child’s behalf. Identifying whether your child has one is a simple two-step process:
- Check the eligibility dates; only those born between 01/09/2002 and 02/02/2011 would have received a voucher
- If your child was born between those dates, this HMRC online tool can be used to track down the account details
HMRC aim to respond to any enquiries within 15 days, stating how much money is in your child’s account, if they have one, plus details of where it is being held.
If you track down a CTF that has money in it, two options exist:
- Leave it where it is (the child can access the money when they are 18)
- Transfer it to a Junior ISA (Individual Savings Account)
If the money is left in the CTF, you have the option of paying into it on behalf of your child. An annual allowance of £4,128 applies, and can be given by yourself, friends and family members. Contrary to many saving accounts (especially ISAs), the annual allowance resets on the child’s birthday, not the start of a new tax year.
If you decide to continue saving on behalf of your child, better rates of return can be found by transferring to a Junior ISA. At the time of writing the best rate for a Junior ISA was 3.5% (The Coventry Building Society), whereas no CTFs were offering interest rates of higher than 1.75%. The annual allowance is the same for both accounts, with a £4,128 Junior ISA annual allowance for the 2017/18 tax year.
Transferring to a Junior ISA from a CTF is a simple process. When researching Junior ISA providers, the key thing to ask is whether they accept Child Trust Fund transfers, and whether or not a fee is payable to switch. Once you have decided which provider to use, the account details that HMRC provided can be given, and the transfer completed.
Why should I save for my child?
Put simply; because kids are expensive!
Whilst the money you save for your children is theirs to do with as they wish, it will likely be spent on key life events. A lump sum of any size will give them a helping hand (and might even save you from having to help out financially in the future). For example:
- University and further education costs
- Deposit for a home
All of these are significant costs that would be made much more manageable if money was set aside at an early age, compounding nicely for use in the future. It may not be convenient (or possible) to put money away each month, but every little helps, and can go a long way in helping your little angels when they aren’t quite as small (or angelic).
For more information on Child Trust Funds and Junior ISAs, feel free to get in touch with us on 0207 808 4120.