3.13.3 Child Trust Funds and Junior Individual Savings Accounts

SCOPE OF THIS CHAPTER

Note: The setting up of new Child Trust Funds ceased in January 2011. This chapter applies to children born between 1st September 2002 and 2nd January 2011, in respect of whom Child Trust Funds were set up. It also provides information on Junior Individual Savings Accounts set up by the Government in 2012.

AMENDMENTS

This chapter was updated in September 2011, to take account of the ending of Child Trust Fund accounts and further amended in April 2012 to include information about Junior Individual Savings Accounts (ISAs).

Child Trust Funds
Junior Individual Savings Accounts (ISA's) for Looked After Children

1. Child Trust Funds

1.1 What is the Child Trust Fund?

The child trust fund is a savings and investment account designed to give children born between 1st September 2002 and 2nd January 2011 a financial start in life and to help teach them the value of saving.

All children born between those dates who are eligible are entitled to this account including children in care.

To ensure that an account is open for all relevant children being looked after, a monthly return was required from all local authorities from April 2005.

1.2 Who is Eligible?

Children born between on or after 1st September 2002 and 2nd January 2011 are eligible for the child trust fund if child benefit has been awarded for them for at least one day before 4th January 2011, they live in the UK and they are not subject to immigration restrictions.

There are special rules for children in care (see Section 1.7, Child Trust Fund and Child in Care).

1.3 How does the Child Trust Fund Work and how much is it Worth?

For children born between 1st September 2002 and 1st August 2010, a voucher worth £250 was sent to the child benefit claimant, with a further £250 for children of families on low incomes. For children born between 2nd August and 2nd January 2011, the voucher was for £50, with a further £100 for children of families on low incomes. A person with Parental Responsibility for the child could then open a child trust fund account for that child with an approved CTF provider, e.g. bank, building society etc.

If after a year, no one had opened an account, the Inland Revenue would open an account for the child.

Children whose 7th birthday fell between 1st September 2009 and 31st July 2010 received an extra payment on their birthday of £250 (plus an extra £250 for low-income families/in care).

1.4 Can Additional Payments be made?

Anyone can contribute to a child's trust fund up to the sum of £1200 per year.

1.5 Who can Access the Money in the Child Trust Fund?

Only the child can withdraw money from the fund when he or she reaches 18. No one else can touch it.

The money belongs solely to the child despite the fact that the person with Parental Responsibility manages the money until the child reaches 16. Young people aged 16 and over can take over the management but cannot make withdrawals until they are 18.

1.6 Exceptions

In the case of terminally ill children, the person with Parental Responsibility can request permission to withdraw funds.

1.7 Child Trust Fund and Child in Care

There are special rules for children in care as child benefit is not payable to them whilst they are in care. If a child benefit award is made for a child before he or she came into care, s/he is eligible for the fund account in the usual way.

Where a child came into care soon after birth, the Inland Revenue opened a child trust fund account for the child.

Even when the local authority has Parental Responsibility under a Care Order, they are not entitled to open or manage a child trust fund account. Where possible, the Child in Care’s parents must be encouraged and helped to take on this responsibility.

1.8 Roles and Responsibilities of LA

Local authorities must make returns to HMRC as follows:

Returns for periods up to 6th April 2011

Local authorities must make monthly returns, including nil returns, for all months up to and including the month ending 6 April 2011 of children in care who were:

Born after 31st August 2002 and before 3rd January 2011; and
Who became looked after for the first time before 3rd April 2011.

Where local authorities subsequently discover, for whatever reason, that a child’s details were not included on the appropriate return they should complete a form CT15 (Child) and send it to the Child Trust Fund Office (CTFO).

Returns from 7th April 2011 onwards

From 7th April 2011, local authorities must make a return each month of any looked after children:

Born after 31st August 2002 and before 3rd January 2011; and
Under the age of 16 at the end of the return period and in the period covered by the return: became looked after and have no one (apart from the local authority), or no one appropriate, with Parental Responsibility, or were already looked after, but their circumstances have changed so that there is now no one (apart from the local authority), or no one appropriate, with Parental Responsibility.

This is so that the Official Solicitor / Accountant of Court can manage these children’s Child Trust Fund accounts. For a child to be treated as having no one, or no one appropriate with Parental Responsibility, at least one of the six conditions set out at paragraph 5.5 of the Guidance for Local Authorities must apply.

Please remember:

To include any child’s details that were not included on an earlier return for a period before or after 7th April 2011.

If there are no children to be reported in any month, a nil return is no longer required. No child born on or after 3rd January 2011 need be included in any return to CTFO.

Top-up Process –The Local Authority’s power to make top-up payments ceased on 31st December 2010.

1.9 Parental Responsibility

The child’s parent is deemed eligible to manage the Child Trust Fund except in the following circumstances:

Where the child lives permanently away from the parent with no face to face contact (including children whose plan is for adoption);
Where there is a court order terminating their contact with the child;
Where the parent is deemed to have significant mental health problems
Where the child is lost and abandoned and where there is no prospect for reunification.

NB In all cases where the decision is to exclude, legal advice must be sought.

2. Junior Individual Savings Accounts (ISA's) for Looked After Children

2.1 Introduction

In November 2011, the Government announced a new scheme to support long-term savings for Looked After children. Those who did not previously benefit from a Child Trust Fund (CTF), and have been Looked After for 12 months or more, will receive a £200 Government payment into a Junior Individual Savings Account (Junior ISA).

2.2 What are Junior ISAs?

Junior ISAs provide a tax-free way to save for under 18s. The money in a Junior ISA belongs to the child, but they can't take the money out until they are 18. They can then decide what they want to do with it. Because savings are locked into the account until the account holder's 18th birthday, Junior ISAs are for building long-term assets, rather than day-to-day savings.

2.3 Who can pay money into Junior ISAs?

Anybody can put money into a Junior ISA. The total limit for payments into Junior ISAs is £3,600 in each tax year. For eligible Looked After children, the Government will open the accounts, making a one-off initial payment of £200 (or pay this into existing accounts already held by Looked After children). Additional payments could then be made by carers, local authorities or young people themselves.

The Government is also hoping to be able to raise further contributions from people or organisations that want to support Looked After children. These contributions would be added to accounts.

Children over the age of 16 are responsible for managing their own accounts. Once their account is opened they will be able to make decisions about how best to look after their money for themselves, though they still won't be able to access their savings until they are 18. The scheme will provide financial education to help Looked After children make the best choices about what to do with their savings.

2.4 Which Looked After children will be eligible?

All children in the UK who have been Looked After continuously for 12 months or more and who were not eligible for a CTF (i.e. were born before 1 September 2002 or after 1 January 2011) will be eligible for the scheme. This includes children who are subject to a Care Order and who are voluntarily Looked After, whether in residential care, with a foster carer or at home.

Looked After children born between 1 Sept 2002 and 1 Jan 2011 have previously received support for their long-term savings through the Child Trust Fund (CTF). They will keep their CTFs until their 18th birthday, when they can access their savings. Junior ISAs were designed to replace CTFs following the end of the CTF scheme. No one can hold both a CTF and a Junior ISA

2.5 When will the first accounts be opened?

The first payments under the scheme should be made around early summer 2012.

End