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Question
Why are there no restrictions on the use of the money in a Child Trust Fund (CTF) account when a child reaches 18?
What if my child is not ready to use this money at 18?
Can I influence what the money is spent on?
The Government announced in the Pre-Budget Report on 6 December 2006 that funds held in CTF accounts on maturity will be allowed to roll over into Individual Savings Accounts (ISAs), what does this mean?
What happens if my child is terminally ill?
What happens to a CTF account if the child dies?
What happens if a child dies before an account is opened?
Answer
Q. Why are there no restrictions on the use of the money in a Child Trust Fund (CTF) account when a child reaches 18?
A. All 18 year olds with CTF accounts should have learnt about personal finance at school and this should equip them to make the decisions that are best for their own circumstances. It would be extremely difficult for anyone else to decide what is the best use of CTF money given the different needs of different people. The fact that 18 year olds will have managed their CTF accounts since 16 should also help them decide how to use the money wisely.
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Q. What if my child is not ready to use this money at 18?
A. All children will have been receiving financial education that will help them
• manage their finances with future needs in mind
• understand the value of savings
• make the best decision for their own circumstances when they reach 18.
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Q. Can I influence what the money is spent on?
A. The money belongs to the child. The UK treats a person of 18 as an adult and it is their decision how to spend the money. There are no restrictions on how the money in a CTF account can be used. All children will have been receiving financial education to help them manage their finances with future needs in mind.
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Q. The Government announced in the Pre-Budget Report on 6 December 2006 that funds held in CTF accounts on maturity will be allowed to roll over into Individual Savings Accounts (ISAs), what does this mean?
A. CTF accounts will start to mature in 2020. The Government announced that it will allow funds to be rolled over into ISAs on maturity and it will be consulting in due course on the best way to facilitate this reform. ISAs allow individuals to save, without being subject to tax on any income or gains on those savings, in much the same way as CTF accounts.
Once further detail is available this answer will be updated.
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Q. What happens if my child is terminally ill?
A. The general rule is that no money can be withdrawn from a CTF account until the child holding the account is 18. The exception to this is where the child is terminally ill. The Government wants children who are terminally ill to be able to benefit from the money in their CTF accounts.
Use this link for more information
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Q. What happens to a CTF account if the child dies?
A. The money in the CTF account including the Government payments will go to whoever inherits the child’s estate (any assets belonging to the child). This is usually the child’s parents or the husband or wife if the young person was married.
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Q. What happens if a child dies before an account is opened?
A. If a child dies before the CTF account is opened, or before the Government money has gone into the account, and the child’s parents wish to claim this money, they should call the CTF Helpline or write to HMRC (see contact us button at the top of the page).
To be eligible for the CTF it is necessary to be awarded Child Benefit and the CTF helpline will explain how to do this. There are strict time limits for claiming Child Benefit and it cannot be paid for any period earlier than 3 months before the claim is made.
The Child Benefit rules allow for it to be paid for the 8-week period following the week in which a child dies. If Child Benefit is not claimed within 3 months of the end of the 8-week period it cannot be awarded for the child and this will mean that a child’s parents or guardian will not be able to claim the CTF payment.
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