Are you about to turn 18? Fancy a little windfall as you enter into adulthood? Well, you may have some money waiting for you that you didn’t even know about. Recipients of the Labour government’s Child Trust Fund scheme are now turning 18 and are able to access their money.
But with 4.5 million accounts initially set up, how many know they even have a fund, or know how to access it? We break down what Child Trust Funds are, how to go about finding out if you have one, and what to do with your potential lump sum.
What is a Child Trust Fund?
The Child Trust Fund scheme was the brainchild of the Labour government in 2002. Launched to encourage parents to save for their children, the government initially contributed £250 to a tax-free savings account during the child’s first year. The government then added a further £250 when the child turned seven. For lower income families the amount was £500.
Parents, family members and friends could contribute to the fund, although there were limits on how much could be saved. Child Trust Funds were available from different providers and were typically accounts where the money was invested in shares.
As for how much will be available to each account holder, this depends on the original value of the government voucher. How the shares have performed over time will also have an impact.
How can I access my Child Trust Fund?
According to HMRC, a total of 6.3 million people will be able to redeem the money, or continue to save. Are you one of them?
If you don’t know whether or not you have a Child Trust Fund, you can find out using the Government Gateway service. You’ll need a Government Gateway user ID and password. If you don’t already have these, you can create an account when you fill the form in online.
If you are a parent searching on behalf of your child, you’ll need either their Unique Reference Number, which can be found on their annual CTF statement, or their National Insurance number.
HMRC will then send you details of your Child Trust Fund by post within three weeks of receiving your request.
Alternatively, The Share Foundation charity is also running a free finding service.
What can I do with the money?
The idea behind Child Trust Funds was to encourage parents to save for their children’s future. If you don’t have any immediate use for the money, continuing to save could be a sensible option.
As the money is held in a tax-free account, you could consider placing it in an ISA in order to continue to shield it from any tax charges. An easy access cash ISA would give you the flexibility of being able to access your money when you need it. It would also give you a small return on your savings.
However, savings rates are historically low at present. If you want to make more of a return on your money, you could consider a stocks and shares ISA, which could earn you more than a regular cash ISA.
It’s best suited to savers who don’t need immediate access to their funds, largely due to the fluctuating nature of the stock market. And do remember, that this is an investment product, so it does carry an element of risk.
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