Since September 2020 the first holders of CTF accounts have begun to turn 18 and have been able to withdraw their money but, in Healthy Investment’s experience, a large majority have kept their funds invested.
On the holder’s 18th birthday the CTF transfers into an adult ISA, with no impact on that year’s ISA subscription limit. Once their CTFs have converted into adult ISAs, members are able to withdraw their funds as they wish. However, of the Healthy Investment CTFs, since 1 September 2020 when the first CTF holder reached 18, just over 80 per cent of them chose to keep their money invested in a Healthy Investment ISA rather than cashing it in.
Healthy Investment is a major provider of CTFs, managing more than 93,000 of these accounts on behalf of younger members.
Peter Green, Chief Executive of Healthy Investment, said, “We have always done our best to educate members, young and old, about the value of long-term investment, and it is heartening to see that our youngest members have been taking these lessons on board.
Some people might argue that the pandemic has reduced the scope for young people to spend this money anyway, but I’m not so sure. Given the year that most 18-year-olds have just had it would be hard to blame them, when given access to a significant sum of money, for using it to buy whatever they could to brighten up their lives.
The fact that the overwhelming majority have not done so demonstrates a maturity and long-term outlook that I can only commend, and that I hope will mark the beginning of a lifelong savings habit. These CTF members are now the holders of adult ISAs, arguably the most effective savings and investment products ever designed, and, by keeping their funds invested, they have taken the first step toward a more secure future.”
Child Trust Funds were one of the flagship policies of the former Chancellor of the Exchequer Gordon Brown and were intended to help improve social mobility by giving all children a nest egg. The government issued CTF vouchers worth between £250 and £500 to the parents of all children born in the UK between 1 September 2002 and 3 January 2011.
CTFs were discontinued by the Coalition Government in 2011 and replaced by Junior ISAs (JISAs) which, like CTFs, are free from capital gains tax and income tax but do not benefit from an initial government cash injection.
The beneficiaries of CTFs can take control of their accounts from the age of 16, at which point they can choose a new provider, transfer their CTF into a JISA or switch their investments into different funds. They cannot, however, withdraw their money before the age of 18.
Parents or guardians of CTF holders who are aged under 16 can also convert their children’s accounts into JISAs and/or transfer between providers if they wish. JISAs automatically convert into adult ISAs on the holder’s 18th birthday and, like CTFs, can accept subscriptions of up to £9,000 per year.
Top-up your Child Trust Fund
If you haven’t already made arrangements to add to your child’s CTF and would like to do so, you can top up online by debit card.