Government announces
spending cuts to CTF
On 24th May 2010, the Government announced that it intends to reduce and then stop all government contributions to Child Trust Funds.
These changes affect nearly all existing Child Trust Fund accounts, parents who haven’t yet used their CTF vouchers and those families expecting a baby.
This guide provides everything you need to know about the changes and how they will affect you and your child.
What are the expected changes to CTF?
- From 1st August 2010 children will no longer receive an additional payment from the government when they reach age 7.
- If your baby was born on or before 1st August 2010 and you successfully claim Child Benefit by 1st November 2010 you should receive a voucher for £250.
- If your baby is born after the 1st August 2010 up to the 31st December 2010 and you successfully claim Chlid Benefit by the end of March 2011, you should receive a £50 voucher and children in lower income families should receive a £100 voucher.
- Children born after 31st December 2010 will no longer be eligible for a CTF and will not receive a voucher from the government.
- Existing accounts will remain open but will not receive any further government contributions.
- CTF vouchers already issued will continue to be valid until their expiry date.
How and when does the Government intend to reduce and then stop CTF payments?
The Government intends to reduce government contributions later this year, and then stop them altogether from early in 2011. Subject to the relevant legislation being approved by Parliament, the Government intends:
- to reduce government contributions for children born from 2nd August 2010:
- from £250 to £50 to children in better off families; and
- from a total of £500 to £100 to children in lower income families
- to stop all government contributions at age 7 for children that turn 7 on or after 1st August 2010; and
- for HMRC to stop issuing new CTF vouchers from January 2011 (vouchers issued before this date will remain valid)
If your baby is born on or before 1st August 2010 and you successfully claim Child Benefit by the 1st November 2010 you should receive £250. After that the CTF voucher reduces to £50.
If your baby is born after the 1st of August 2010 and before 1st of January 2011 and you successfully claim Child Benefit by the end of March 2011 you should receive £50. After that, no further CTF vouchers will be issued.
I am pregnant. Will I still get a CTF voucher when my child is born?
Yes, as long as your child is born before the legislation to stop issuing CTF vouchers comes into place, and your child is eligible. The voucher is triggered by a valid claim for Child Benefit, so you should apply for this as soon as possible.
My baby is due soon – what shall I do?
If your baby is born on or before 1st August 2010 and you successfully claim Child Benefit by 1st November 2010 you should receive £250. After that the voucher reduces to £50.
My baby isn’t due until January 2011 – what are my options?
Family Investments are currently developing a new product for children who will miss out on a CTF. If you register to receive a Child Trust Fund information pack, but the due-date you give them is on or after January 2011, they'll send you relevant information about their new product at the right time.
I have received my child’s CTF voucher but not used it yet – can I still use it?
Yes. You will be able to use it up to the expiry date shown on the voucher. Following the announced changes to the CTF, you might want to think about investing it with a specialist company dedicated to the CTF scheme for the long term such as Family Investments. If you do not use your voucher before the expiry date, HMRC will open an account for your child.
I’ve lost my child’s voucher. Does that mean I won’t now get a CTF for my child?
No. You can apply for a replacement voucher on the government CTF website at www.childtrustfund.gov.uk or if you have the voucher number and expiry date you can apply directly online for a Family Investments CTF.
What if I don’t use my child’s voucher?
The government will open an account for your child with one of 15 providers. Don’t leave your child’s CTF provider to chance!
When government contributions stop, will I be able to open a CTF account for my child anyway (i.e. without a voucher)?
When the relevant legislation is in place, the Government intends that HMRC will no longer issue vouchers and it will not be possible to open a CTF account (other than for those who have already received a voucher before this date).
Family Investments are currently developing a new product for children who will miss out on a CTF. If you register with Family Investments to receive a Child Trust Fund information pack, but the due-date you give is on or after January 2011, they'll send you relevant information about the new product at the right time.
My child already has a Child Trust Fund with Family Investments – what will happen to it?
If your child is lucky enough to already have a Child Trust Fund, their account will continue to operate as it currently does. As the leading CTF provider Family Investments are committed to looking after the accounts of their 1.1m customers for the next 18 years. You, family and friends can still contribute a combined total of up to £1,200 a year into your child’s account without incurring income tax or capital gains tax on the fund. And you can still track and manage your child’s account online using their unique Online Wizard service. But once the relevant legislation is in place, your child will not be eligible for any further government contributions.
Can friends and family still contribute to my child’s CTF account?
Yes. There are no plans to change anything here - family and friends will still be able to contribute up to a total of £1,200 into a CTF account each year. At Family Investments you can invite family and friends to top-up into your child’s account. All they need is the child’s CTF account number and date of birth.
Please remember that any money paid into the account belongs to the child. Only they will be able to access it, and only when they are aged 18.
Will my child’s CTF account still get tax relief?
Yes. There are no plans to change anything here – existing CTF accounts will continue to benefit from tax free investment growth. Please remember that if your child has a stakeholder CTF, it invests in stocks and shares, so its value can fall as well as rise and your child could get back less than was paid in.
Will I (or my child) now be able to withdraw the money invested in my child’s CTF account?
No. There are no plans to change anything here – no withdrawals will be permitted until the child turns 18.
Will the Government withdraw the money it has put into my child’s CTF account?
No.
My child has a CTF account with another provider can I still move my child’s account?
Yes. It’s natural for parents to consider transferring their child’s CTF to a specialist provider like Family Investments. You can transfer your child’s CTF account to Family Investments at any time.
I have opened a CTF account but I haven’t yet got my additional payment (the £250 for children in lower income families) – will I still get it?
Yes. Additional payments for children who became entitled to a CTF account before the relevant legislation is in place will be paid.
My tax credit award hasn’t been finalised, will I still get an additional payment?
Additional payments that become due because of a relevant tax credit award in 2009/10, whether or not the award is finalised yet, will be paid.
My child is disabled, will they still get a government payment?
If your child has a CTF account, and is entitled to disability living allowance at any time in 2010-11, then they will be entitled to a disability payment into their CTF account, and this will be paid. From 2011-12 onwards, the Government intends that these payments will stop.
My child is 4 years old. Will they still get their age 7 payment?
No, under the Government’s proposed changes your child will not receive a government contribution at age 7.
What will happen to the payments into CTF accounts paid by the Welsh Assembly for Welsh children?
Welsh Assembly payments are yet to be confirmed by the Welsh Assembly.
How will the abolition of the Child Trust Fund affect Family Investments?
As the leading provider of Child Trust Funds, Family Investments will continue to give all its existing 1.1 million CTF holders the very best of care now and over the next 18 years. Family Investments were market leaders in long-term investments for families before the Child Trust Fund and they expect this to continue in the future.
Family Investments is a mutual company which means that they don’t have shareholders and are solely run for the benefit of its members. Though CTF is an important part of their business, it only accounts for a proportion of their revenue, with the rest coming from other savings and investment products, such as ISAs.
Family Investments are developing a new product for children who will miss out on a CTF, as well as a range of new products designed especially for families with children. If you register to receive a Child Trust Fund information pack, but the due-date you give is on or after January 2011, they’ll send you relevant information about their new product at the right time. Register your due date (click: https://www.familyfinanceonline.net/secure/babydetails.aspx).
Who can I talk to for further information?
Talk to Family Investments' friendly customer service staff based in Brighton on 0800 616695 (calls may be recorded and monitored for training purposes). You can also contact the Government Child Trust Fund helpline number on 0845 302 1470 or visit their website at www.childtrustfund.gov.uk.
Please note: the information above represents Family Investments' view of the government changes. It is not exhaustive or definitive and for the avoidance of doubt should you have any concerns we would recommend you contact HMRC direct. Family Investments does not provide advice.