The children who were first to receive the government’s Child Trust Fund (CTF) vouchers are now 16 and 17 years old which means that it’s important for parents and guardians to talk to their children about the CTF and how they are going to use the money that’s invested for them.
The government’s rules for Child Trust Funds means that from their 16th birthday the child is able to take control of the CTF and effectively lock out parents from any decisions on how or where the money is invested.
Whilst they can’t access the funds until they are 18 they can register with the CTF provider as the official Registered Contact. This means that all correspondence goes directly to them, they can move the CTF from one provider to another or transfer the funds to a Junior ISA. Under data protection rules once a child has become the Registered Contact a provider will not be able to supply any information about the CTF to the parent, where it is invested or the value of the investment.
Peter Green, Chief Executive of the Society, explained ‘All CTF providers have to abide by the government’s rules on managing Child Trust Funds. However we have serious concerns, that we have raised with the regulator, about the risks of financially inexperienced young people making complex investment decisions.’
Peter added ‘We’ve already seen some examples of marketing aimed directly at young people, through schools and colleges, encouraging them to transfer their funds to what we believe are high risk investments.’
Whilst the government is unlikely to change the rules and it has always been clear that the funds invested in a CTF belong to the child on their 18th birthday we believe, especially as some of these funds have grown into considerable sums, that it’s important to talk to children about ensuring that the investment is used wisely.
The government is still consulting on the options that will be available to CTF holders when they turn 18 but the good news is that it’s looking likely they will have the option to leave the funds invested until they need them.
For more information about your child’s CTF or to discuss transferring it to our lower risk Junior ISA please contact one of our Membership Team on 0161 762 5790.