OVERVIEW
The Child Trust Fund, known as CTF was available between September 2002 until January 2011, when it was closed to new investors and replaced by the JISA – Junior ISA Account.
CTF’s are saving products for children, income, interest or capital gains earned within the CTF wrapper are completely tax free, in the same manner ISA accounts are.
Though it has not been possible to open a new CTF since January 2011, existing CTF accounts can remain open and continue to receive subscriptions until the child turns 18, when the assets held within the CTF will be transferred to the child and the CTF closed.
ALLOWANCE
In tax year 18/19 the CTF allowance is £ 4,260.00 and in line with JISA‘s will increase to £ 4,368.00 in tax year 19/20.
WHO CAN OPEN A CTF ?
As with JISA accounts, CTF’s can be opened on the child’s behalf by a person with parental responsibility for that child. This is known as the Registered Contact, whom is responsible for managing the CTF, including making investment decisions.
SUBSCRIPTIONS AND WITHDRAWALS
Anyone can make subscriptions to a CTF but those subscriptions cannot be withdrawn, beneficial ownership is passed to child and the subscription is legally treated as a gift to that child.
TYPES OF CTF
There were 3 types of CTF’s available
SAVINGS – this is essentially the same as a normal savings account. Subscriptions are held in cash and earn a rate of interest, which is tax free.
STAKEHOLDER – This CTF allows investments in stocks and shares, though has some restrictions, in order to reduce risk
SHARES – This type of CTF allows investment in stocks and shares, with less of the restrictions with a Stakeholder account.
WHEN THE CHILD TURNS 16
At 16 the child can take over management of the CTF from the Registered Contact if they so wish, or continue to allow the Registered Contact remain in control.
JISA TRANSFERS
A holder of CTF can choose (or rather their Registered Contact can) to transfer the assets in a CTF to a JISA account. The CTF would then be closed and future subscriptions paid into the JISA.
Death of a CTF holder
If the child were to die before reaching 18 years old, then their CTF account would be closed and the assets within distributed as part of their estate.