Scroll down to find out more about the new rules on Child Trust Funds and your rights as a parent.
Changes to the Child Trust Fund rules from August 2010
The government has announced that children born from 1st January 2011 will not be eligible for a child trust fund account. It has also announced that it will cease making payments into existing Child Trust Fund accounts.
Children born between the 2nd of August 2010 and 1st January 2011 will receive reduced Child Trust Fund Payments to open an account. The standard initial voucher will be for £50, with those families on low incomes who qualify for an additional payment receiving a further £50.
Where a child has turned 7 after 31st July 2010, they will not receive the additional government payments previously made to children at that age.
What about the additional Child Trust Fund payments made to children on DLA?
Children who were eligible for a child trust fund and who received Disability Living Allowance (DLA) at some point in 2009/10 got an extra payment into their Child Trust Fund account during 2010. This was £100 - or £200 if the child received the care component at the high rate. A further additional disability payment will be made to any child who is eligible for a Child Trust Fund and who received DLA at some point during 2010/11. This payment is expected to be made at some point after April 2011. However no further disability payments will be made for future years.
What will happen to Child Trust Fund accounts after December 2010?
Children born after December 2010 will not be eligible for a Child Trust Fund. Those children who already have an account will receive no further government payments. However any money already invested in a Child Trust Fund will not be affected. In addition friends and family will continue to be able to make contributions into accounts up to an overall total of £1,200 a year.
What is a Child Trust Fund?
A Child Trust Fund (CTF) is a long-term savings and investment account for children born between 1st September 2002 and 31st December 2010. Each child automatically receives a voucher from the government, which their parents can use to open a CTF account. Children who live in low income families are eligible for an additional trust fund payment.This money is invested for your child and grows over time.
In 2010 and 2011 the government is making extra payments into the Child Trust Fund accounts of those children who receive Disability Living Allowance.
Having a CTF for your child will not affect any of the benefits or tax credits that you claim.
How do you apply for a Child Trust Fund?
You don’t have to apply for a Child Trust Fund. Instead you should automatically be sent a £50 (£250 where a child qualified for Child Benefit before 2nd August) CTF voucher once you have claimed Child Benefit.
Which families are eligible for an additional payment for low income families?
A child in a low income family is entitled to an additional payment of £50 (£250 where a child qualified for Child Benefit before 2nd August) directly into their CTF account. To qualify the child must live in a household that is entitled to one of the following benefits:
an income support award which includes payments for that child; or
an income based Job Seeker's Allowance award which includes payments for that child; or
a child tax credit award where household income for tax credits is below an annual figure (£16,190 for 10/11) or where the child tax credit recipient is also receiving Income Support, income based Job Seeker's Allowance, pension credit or employment and support allowance.
You must have claimed the appropriate benefit before your child trust fund voucher expires.
Who qualifies for the extra payments for disabled children?
During 2010, the government made extra payments into the Child Trust Fund accounts of disabled children. In order to qualify for an additional payment your child must have been in receipt of Disability Living Allowance (DLA) at some point during 2009/10. The extra payment was £100 per year, or £200 per year if your child gets the care component of DLA at the highest rate. Most children who qualify should already have received their additional payment but a small number may not receive their payment until March 2011.
The government intends to make a further additional payment into the CTF accounts of children who received DLA in year 10/11. This is expected to happen in April or May 2011. No further disability payments will be made for future years.
The government automatically identifies those children who have both DLA and a child trust fund and makes a payment directly into each child’s account. Parents will receive a letter telling them once a payment has been made
What happens if I don’t open a CTF account for my child?
Child Trust Fund vouchers are valid for twelve months and if you have not opened an account for your child by the time their voucher expires, the government will automatically open a stakeholder CTF account for them.
Where can I open a CTF account?
There are lots of places where you can open an account including banks, building societies and supermarkets. Some will offer ethical or Shari’a accounts. There are three types of CTF account:
* stakeholder account – the money is invested in company shares but there are measures in place to reduce the risks of losing money if the shares do not do well
* shares account – the money is invested in shares without any measures to reduce the risks
* savings account – this type of account does not invest in shares. Instead it grows through interest being paid on the money in the fund.
Make sure that you ask providers about any fees that they charge for running your child’s CTF account. For further help on choosing a Child Trust Fund account visit the Child Trust Fund website or call the CTF Helpline on Tel: 0845 302 1470 (open daily 8am-8pm).
Increasing the money in your child’s account?
You don’t have to add money to your child’s account but you, your family or your friends have the option of doing so, subject to annual limits.
When will my child get the money in their account?
A child must normally wait until they reach 18 years of age to access the money in their account. However if your child has a terminal illness and is not expected to live for more than six months, you can get early access to buy things that your child needs. Contact our free Helpline for further advice.
What happens if my child is terminally ill ?
Click on this link to find out more about what happens in these circumstances
If you need more information
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