Child Trust Funds

CTFs were set up by the Government for all children born in the United Kingdom between 1 September 2002 and 2 January 2011. The Government paid money into an account, which was usually chosen by the parent/guardian, in the child’s name.

There were different investment options across multiple providers, although many of these have now consolidated and are currently administered by specialist companies. In most cases the fund will have a designated guardian who is responsible for making decisions on the fund on behalf of the child.  The majority of these CTFs, the guardian will be one of the parents although there are accounts where no decision or declaration was made at the time of the child’s birth.  In these cases, the government set up default investments, meaning the child has a CTF but may not be aware of this or know where it is invested.

Over 6 Million accounts were opened and they are typically valued at around £2,000 each. HMRC opened 1.2 million accounts directly for children as no parent made an option to open an account for their child.

The time to act is now

The first funds, opened in September 2002, are now starting to mature, from September 2020, as the children turn 18 years old.  At that point the child will need to decide what they want to do with their fund:

  • withdraw the whole of their account
  • withdraw part of their account and reinvest the remainder in an ISA
  • transfer the whole of the cash amount held to one or more accounts
  • transfer all the proceeds from realised investments to one or more other accounts
  • transfer all the investments to an alternative investment vehicle

Whatever they opt for, the administrator of the fund needs to be in contact with the beneficiary in order to repatriate the funds with their rightful owner.

CTF Administrators responsibility to connect with beneficiaries

An account provider who has no instructions from the child must transfer the maturing CTF to a protected account which can be a matured Child Trust Fund account or an ISA managed by them. A matured CTF account of the person who held a CTF must be subject to the same general terms and conditions which applied immediately before the account holder’s 18th birthday, as if the investments had remained in the CTF. Providers must ensure that investors are treated fairly in accordance with the FCA’s principles.

18 years is a long time. Coupled with the fact that the original provider of the CTF may have transferred the assets to an alternative provider, in some cases multiple times. The family of the child will likely have moved, again some multiple times and there may also be the unfortunate situation of separation or divorce meaning that families are in dispute. As such CTF administrators face a challenging situation with out of date addresses and details and an inability to contact anyone when the child reaches maturity.

Target can ensure funds are reunited with the child

Target currently work with existing CTF providers, including the largest administrator of CTF’s in the UK, to identify and verify addresses, enabling them to write to the family and give the child their options, prior to the child’s 18th birthday.

It is important this work is completed in advance of the 18th birthday for the following reasons:

  • The options should be provided to the child before age 18
  • The child is likely to be living with a parent who we can trace via the guardian address on file
  • Data on the guardian is more likely to give a successful outcome than when a child just reaches maturity at 18 years old

Please contact Target if you are a CTF provider and need assistance in verifying the whereabouts of your policy holders.  In the majority of cases we can verify details quickly and without any contact with the child or guardian, allowing you to fulfil your obligation to reunite the assets with their intended beneficiary and not incur the administrative burden and costs of setting up alternative investment vehicles.