Junior ISA: Nationwide explain benefits of setting up account
Child Trust Funds were originally set up for children born between September 2002 and January 2011. They can have up to £9,000 saved into them a year and the money held within them will officially belong to the child being saved for. The money can only be taken when the child in question turns 18 but they can take control of the account when they turn 16.
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Today, the HMRC revealed that millions of teenagers are set to benefit for the first time from the money held in CTFs.
They detailed that since 2002 around 6.3 million CTF accounts have been set up, with roughly 4.5 million being opened by parents or guardians with the remaining 1.8 million being set up by HMRC themselves where parents did not open an account.
This could mean that some children may not know that there are accounts in their name and as such, are unaware that money is waiting for them.
From September 1, the oldest children affected by CTFs will turn 18 and be able to access their money.
READ MORE:ISA transfer warning: Providers may not accept your funds
Junior ISAs were launched to replace CTFs (Image: GETTY)
HMRC explained that around 55,000 accounts will mature each month beyond this and as such, they have created an online tool which can help young people find out where their account is held.
John Glen, the Economic Secretary to the Treasury, provided the following comments along with HMRCs announcement: “We want to make sure all young people can access the money which has been set aside for them, to invest in their future and continue a savings habit, as they turn 18.
“If you’re unsure if you have an account or where it may be, it’s easy to track down your provider online.”
This is important to note as it should be remembered that CTF accounts are not actually held by HMRC but are spread across various providers.
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HMRC have made the ability to hunt down CTF accounts easier by changing some of the rules associated with them.
They recognised that the online form that they provided to customers to trace their CTFs requires a level of identity verification that many 16 to 18 year olds will not have.
As such, they will now allow the children to access the form with just their National Insurance number.
For those who wish to continue adding money into a CTF, they’ll be able to do so by cheque, standing order or direct debit for stakeholder accounts.
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Savings or share accounts may have different methods for deposits and as such the holders will need to check with the providers.
Some children may be being looked after by local authorities and have had a CTF set up on their behalf.
These kinds of accounts will be managed by the Share Foundation who will:
- write to the child when they take control of the account
- change the type of CTF account and provider if necessary and write to the child to explain why the change was made
- send account statements to the child
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Junior ISAs can be opened by those who do not have a CTF but are looking to build up a nest egg for their children.
Junior ISAs can have up to £9,000 saved into them in the current tax year and the child being saved for must be under 18 and be living in the UK.
These accounts can be opened with a range of banks, building societies, credit unions, friendly societies and stock brokers.
Children can have either a cash or stocks or shares ISA but they’ll only be allowed to have one of each as a maximum.
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FAQs
You can access the money in your Child Trust Fund when you turn 18. Your provider will usually write to you a month or two before to ask what you'd like to do. Here are your main options: Move the money to a new savings account and carry on saving – see how to find the best savings account for more help.
How to withdraw money from a Child Trust Fund? ›
How to withdraw your Child Trust Fund money
- Go to 'Next steps' After you turn 18, click the 'Next steps' button when you login to MyPlans under your Plan value/Child Trust Fund amount.
- Enter how much you want to withdraw. You can enter the amount you want to take now in the 'withdraw' box. ...
- Enter your bank details.
A child is eligible for CTF if they are: born after 31 August 2002; resident in the UK; and. the subject of a Child Benefit (ChB) award.
What is the unique reference number of the child's trust fund? ›
The URN is the unique reference number of your child's Child Trust Fund. It's nine characters long, and you'll usually find it on statements from your CTF provider. You need to give us the URN to transfer your CTF to a Junior ISA. If you can't find it, you may need to request it from your CTF provider.
Can I withdraw money from my child's trust? ›
So once the trust is created and assets are transferred, they generally can't be taken out again. You can still act as the trustee but you'd be limited to withdrawing money only on an as-needed basis to cover necessary expenses.
How to get money out of a trust fund early? ›
Another possible way to get money out of a trust fund is to request a cash withdrawal. This would require putting the request in writing and sending it to the trustee. The trustee might agree. But that individual or entity must also fulfill their fiduciary obligations.
How long does it take to withdraw money from a trust fund? ›
If you've withdrawn money from your Child Trust Fund or Junior ISA, we'll process this the next working day. It can take up to five days for this money to show in your account. If we're sending your money by cheque, this could take longer depending on the post.
How do trust funds pay out? ›
The grantor can set up the trust, so the money is distributed directly to the beneficiaries free and clear of limitations. The trustee can transfer real estate to the beneficiary by having a new deed written up or selling the property and giving them the money, writing them a check or giving them cash.
What to do with a matured Child Trust Fund? ›
Once the account matures, the money can either be taken out or transferred into an ISA . In Scotland, applications need to be made to the Office of the Public Guardian in Scotland. In Northern Ireland, applications need to be made to the Office of Care and Protection.
What is the biggest mistake parents make when setting up a trust fund UK? ›
Biggest Mistake Parents Make When Setting Up a Trust Fund UK
- Understanding the Purpose of the Trust Fund. ...
- Choosing the Right Type of Trust. ...
- Inadequate Trustee Selection. ...
- Overlooking Tax Implications. ...
- Forgetting to Fund the Trust. ...
- Issues with Revocable Trusts. ...
- Keeping the Trust Up to Date. ...
- Lack of Flexibility and Foresight.
Child trust funds (CTFs) are long-term tax-free savings accounts. You will have (or have had) one if all of the following applies: were born between 1 September 2002 and 2 January 2011. your parent or guardian had a live child benefit claim for you.
What is a trust fund baby? ›
A trust fund baby refers to someone whose parents created a trust account, which they benefit from. The term “trust fund baby” has a negative connotation, as it's associated with the stereotype of a spoiled individual who doesn't have to work.
How do I find out if someone is a trust fund baby? ›
Five Quiet Hints You're Dealing with a Trust Fund Baby
- They go from zero to hero fast. ...
- Their life is a series of highlight reels. ...
- They don't have to work and yet they still eat. ...
- Something feels off. ...
- They have daddy's safety blanket. ...
- Why trust fund babies are bad for you.
A Child Trust Fund is a long-term tax-free savings account for children born between 1 September 2002 and 2 January 2011. Find a Child Trust Fund as a parent or if you are over 16. The Child Trust Fund scheme closed in 2011. You can apply for a Junior ISA instead. This guide is also available in Welsh (Cymraeg).
What does URN number mean? ›
The Unique Reference Number (URN) is a six-digit number used by the UK government to identify educational establishments in the United Kingdom.
What age do trust funds pay out? ›
You can set the trust up to be dispersed when the child reaches a certain age, say 25, 30, or even 50 years old. That will allow you to delay turning the assets of the trust over to your child until they reach an age at which you believe they will be financially responsible.
What age is a trust fund? ›
Details. The funds are held in trust for the child until they turn 18, and the money is then theirs to use as they see fit. CTFs are managed by the parents/legal guardians of the child until the child reaches the age of 16.
When should I tell my child about a trust fund? ›
You can create a fund that doesn't turn the money over until the child is 25 or 30. Some parents decide to tell their children at a young age, just to maintain honesty and transparency. Others wait for the child to grow up and learn about money management before breaking the news.
