Child Trust Fund: Policy Changes
On 24th May 2010, the Government announced that child trust fund (CTF) payments would be reduced and then stopped.
The announcement included some frequently asked questions regarding the changes.
Regulations and explanatory notes were passed in July 2010 to implement the changes -
The CTF was withdrawn by the Savings Accounts and Health in Pregnancy Grant Act 2010 for children born after 2 January 2011.
On 26 October 2010, the Government announced that it would introduce a new tax advantaged account for saving for children. In July 2011, following consultation, regulations were published detailing the Government’s new tax-free children’s savings accounts or ‘Junior ISAs’. Following the end of eligibility for Child Trust Funds (CTFs) for children born from 3 January 2011, Junior ISAs aim to provide families with a simple, transparent, accessible and competitive product to save for children who do not have a CTF; and create the conditions for families to save more for their children than they otherwise would. It was expected that 6 million children will be eligible for the ISAs at launch, with a further 800,000 becoming eligible each following year.
- Junior ISAs have been available from 1 November 2011
- Children will be able to have one cash and one stocks and shares Junior ISA at any time, with an overall annual contribution limit of £3,720 (limit increases generally linked to CPI)
- Junior ISAs can be offered by high-street banks, building societies, and any other providers that currently offer standard ISAs
- Funds in Junior ISAs will be ‘locked in’ until the child is 18, and the accounts will then, by default, become adult ISAs
- The Chancellor also confirmed that provisions would be made for looked after children. A transcript with further details at the time of the announcement can be found on the Parliament website.
Currently, children who have a Child Trust Fund (CTF) are ineligible for Junior ISA, the tax-advantaged savings scheme for children under 18. Although CTF savings have not been disadvantaged by this arrangement, in his Budget on 20 March 2013, the Chancellor announced that the Government intended to consult on options for transferring savings held in CTF funds into Junior ISAs.
Information about this consultation, which runs from 14 May 2013 to 6 August 2013, can be found on Gov.UK
Updated 20 May 2013