What is a Child Trust Fund?

The Child Trust Fund (CTF) is a tax-free savings account introduced by the government in April 2005. Launched to kick-start every eligible child’s savings journey with an initial deposit. All parents with children born between 1 September 2002 and 2 January 2011 were provided with a voucher of between £50 and £500 to deposit into a Child Trust Fund account. If the voucher expired, the government opened an account on the parent’s behalf.

Although it is no longer possible to open a new Child Trust Fund, contributions of up to £9,000 per subscription year (calculated from birthday to birthday) can still be made to an existing Child Trust Fund account until the child turns 18.

The history of the Child Trust Fund

Around 6.3 million Child Trust Funds were set up during the scheme, with approximately 28% opened directly by the government if parents did not use their vouchers within 12 months, often referred to as ‘revenue allocated accounts’. CTF accounts could be either Stakeholder or Non-Stakeholder, determined by whether they were government-regulated with capped fees and built-in risk reduction, or offered more flexibility in investment choice but with the potential for higher fees.

Child Trust Funds also came in two main types: cash or stocks and shares, dictating whether the money was held in a savings account or invested in the stock market.

At the time of the scheme launching in 2005, a wide range of providers offered accounts, including high street banks, building societies, and investment firms. Over time, changes were made to the scheme, including reductions to the voucher amounts and the removal of additional government top-ups. As the scheme wound down and closed to new applicants in 2011, a number of providers moved away from managing Child Trust Funds, leaving just a small group of specialist providers still looking after existing accounts today.

Now, Child Trust Funds are effectively replaced by Junior ISAs, which work similarly but requires the parent or guardian to apply to open one and don’t include any government starter deposit. Since April 2015, CTF holders have had the option to transfer their savings into a Junior ISA. From September 2020, those with CTFs began turning 18 and gaining full access to their funds.

It is estimated that there are more than 750,000 matured Child Trust Fund accounts that remain unclaimed. If you're not sure where your Child Trust Fund is held, the government has a free online tool at gov.uk.

Note: You cannot hold both a CTF and a Junior ISA at the same time. To move into a Junior ISA, your CTF would need to be transferred across.

How does a Child Trust Fund work?

A Child Trust Fund (CTF) is a long-term, tax-free savings account held in a child's name. The account belongs to the child from day one, but cannot be accessed until they turn 18, with a parent or guardian being the contact on the account in the meantime.

Initially set up with a deposit from the government, parents and guardians could opt to make additional payments up until the child turned 18 (up to the £9,000 limit each year). The CTF allowance year runs from the child’s birthday to the day before their next birthday as opposed to the ISA allowance which runs 6 April to 5 April.

Depending on the account type, savings can be held in cash, with profits or stocks and shares, and the type of account will determine the interest or return earned. The registered contact on the account, whether that’s a parent, guardian, or the child aged 16 and over, have the option to transfer to a new provider to secure a better rate or change their investment strategy.

At 18, the Child Trust Fund matures and the child gains full control of their account. They can withdraw their money, transfer it into another tax-efficient product, or a combination of both. Until that point, the funds remain locked, accessible only in exceptional circumstances, such as terminal illness.

How to find a lost Child Trust Fund

With 28% of Child Trust Funds opened automatically by the government, many young adults are unaware that they have one or where it might be. So, it’s important to remember that you don’t need to pay to find a Child Trust Fund, and there are few ways to locate one if you’re unsure.

• HMRC's online tracing tool - The government's tracing tool, you'll need to be 16 or over or be the parent/ guardian of the child and have the child’s National Insurance number. Once you've submitted your details, HMRC will tell you which provider holds your account, and you can take it from there.
• The Share Foundation’s free tool - a charity that helps looked-after children and care leavers track down and access their Child Trust Funds, offering more hands-on support for those who may need extra help.

Once you've tracked down your provider, they'll be able to give you a current balance and talk you through the options when the account matures at 18.

Types of Child Trust Fund

When Child Trust Funds were first opened, parents and guardians could choose from a few types of accounts. Each worked slightly differently depending on how the money was invested.

Stocks and Shares CTF

A Stocks and Shares CTF invested money in the stock market, which tracked the performance of the fund it was invested in. These accounts had the potential to grow more than cash-based alternatives, though the value of the investment could go down as well as up.

Cash CTF 

A cash CTF works similarly to a standard savings account, earning interest on the balance over time. While this option carries less risk than a stocks and shares account, the returns may be lower in the long term.

With-profits CTF

A with-profits Child Trust Fund sits somewhere between cash and stocks and shares. It invested the money with a guaranteed minimum return, plus a share of any profits if the fund performed well, offering more stability than stocks and shares while potentially delivering better growth than a cash account.

How to manage a Child Trust Fund

Looking after a Child Trust Fund is simpler than you might think. Here are a few helpful things to know if your Child Trust Fund is with Unity Mutual.

Understanding how to manage and access your Unity Mutual Child Trust Fund

If your Child Trust Fund is with Unity Mutual, how you manage your account will depend on your age:

Under 18: To manage your account, you (16 or above) or a parent/guardian needs to become the registered contact on the account through the CTF Portal.  Once registered, you can check your balance, update your contact details, or transfer the funds to a Unity Mutual Junior ISA or one from another provider.

Turned 18: Before your 18th birthday, Unity Mutual will send a maturity letter with instructions on how to access our portal, including your unique access code. You can then access your money and let us know what you’d like to do with it when you turn 18.