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.
Do you have to be born in the UK for a Child Trust Fund? ›
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 a trust fund for a child? ›
A trust fund is a legal entity established for the purpose of holding assets for the benefit of specific people, or even for an organization. Children are frequent beneficiaries of trust funds because trust funds can safeguard your assets and make sure they are used for your children's stewardship.
How do trust funds pay out? ›
A distribution in cash calls for the trustee to liquidate the assets in the trust and distribute the resulting cash to beneficiaries. A distribution in kind calls for the trustee to distribute assets to beneficiaries without selling the assets.
How do I get my Child Trust Fund money? ›
How to access your Child Trust Fund
- Find your Child Trust Fund. If you already know that your Child Trust Fund is held with OneFamily then skip this step. ...
- Register for an online account and download Yoti. You can do this as soon as you turn 16. ...
- Consider your options. ...
- Tell us what you'd like to do.
Child trust fund maturity
At 18, your child trust fund “matures”. That means the money can be taken out or moved to a different type of account. You'll need to log into your online account to let us know what you'd like to do with the money. No-one else can do this on your behalf.
Does everyone in the UK get a Child Trust Fund? ›
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.
What is the average amount of money in a Child Trust Fund UK? ›
Young people can choose to take over managing their account at 16 years old and can access the funds at 18 years old. The first young adults with Child Trust Funds reached the age of 18 in September 2020. In April 2021, the total value of all Child Trust Funds was £10.5 billion and the average account value was £1,911.
What is the average trust fund amount? ›
While some may hold millions of dollars, based on data from the Federal Reserve, the median size of a trust fund is around $285,000. That's certainly not “set for life” money, but it can play a large role in helping families of all means transfer and protect wealth.
Can I withdraw money from my child's trust? ›
With an irrevocable trust, the transfer of assets is permanent. 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.
Once money is placed into the trust, the interest it accumulates is taxable as income, either to the beneficiary or the trust itself. The trust must pay taxes on any interest income it holds and does not distribute past year-end. Interest income the trust distributes is taxable to the beneficiary who receives it.
Is an inheritance from a trust taxable? ›
When trust beneficiaries receive distributions from the trust's principal balance, they don't have to pay taxes on this disbursem*nt. The Internal Revenue Service (IRS) assumes this money was taxed before being placed into the trust. Gains on the trust are taxable as income to the beneficiary or the trust.
How long does trust fund take to pay out? ›
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.
Does money from a trust count as income? ›
Are distributions from a trust taxable to the recipient in California? Generally speaking, distributions from trusts are considered income and, therefore, may be subject to taxation depending on the type of trust and its purpose.
How long does it take to withdraw money from a trust fund? ›
It depends on the terms of the trust. It may happen quickly or it could take years or even decades to distribute. It's important to point out that the longer it takes to distribute the assets, the more money it will cost to keep the trust active since you must pay for maintenance and trustee fees.
How do I access my child's trust account? ›
Where is my Child Trust Fund?
- register and create a government gateway login.
- your full name and address.
- child's full name and address.
- child's date of birth.
- child's national insurance number or unique reference number if known.
To take money out of your account, please log into your online account and go to the 'Payments and Transfers' tab on the account you'd like to withdraw from. You'll see a withdrawal option which will guide you through the process. We'll ask you to set up a withdrawal account if you haven't added one yet.
How long does it take to withdraw from Onefamily? ›
о Once we have received a valid instruction, we will withdraw your money on the following working day and pay it into your chosen bank account – this may take up to five working days to clear into your account. о If we are unable to pay your money directly to your bank account, we may be able to send you a cheque.
