Quick Guide to Child Trust Funds and the Small Payments Scheme - A Local Offer Guide
Quick Guide to Child Trust Funds and the Small Payments Scheme
What is a Child Trust Fund (CTF)?
A child trust fund (CTF) is a long-term, tax-free savings or investment account for young people. The scheme was launched in In 2005 by the then-government. Children born between 1 September 2002 and 2 January 2011 were eligible for a CTF account. Parents/carers received a £250 voucher from the government to deposit in the account. The money belongs to the young person, and they can only take it out when they turn 18.
The creation of new CTF accounts, and the vouchers, were brought to an end by a new government in 2011. New accounts can no longer be created, but existing accounts can still receive new money. Child trust funds were replaced by Junior Individual Savings Accounts (JISAs).
What is a Junior ISA (JISA)?
A junior ISA (JISA) is a tax-free savings or investment account. Any money put into a JISA will be locked away until the child turns 18. at which point it will become theirs. The account will also change into a standard (adult) ISA.
What Happens if an 18-Year-Old Cannot Manage Their Money Because of a Disability?
Some young people with a disability might not have the mental capacity to manage the money in their Child Trust Fund or JISA. However, the money will still belong to them when they turn 18. In those cases, the young person’s parent(s)/carer(s) will need to apply to the Court of Protection to act as the young person’s Deputy. A Deputy is someone (usually a family member) who is appointed by the court to manage and make day-to-day decisions about someone’s finances. At the moment, applying to the Court of Protection can be expensive. There is a court fee of around £365. There will also be legal costs if a solicitor is used. However, the government made an announcement on 1 December 2020. All parents/carers of young people who lack mental capacity can ask for court fees to be waived or refunded when seeking access to a Child Trust Fund.
The Small Payments Scheme
In December 2020, the government proposed a new streamlined process. The ’Small Payments Scheme’ would allow withdrawals and payments from cash-based accounts, such as a matured Child Trust Fund (CTF) or a Junior ISA, up to £2,500 – without the need to get permission from the Court of Protection (CoP).
The Small Payments Scheme would be run by banks or building societies and would maintain essential safeguards. The government sought public feedback on the idea, and a consultation ran from November 2021 to January 2022.
What Happens Next?
The government are currently analysing the feedback from the public consultation. In the meantime, parents/carers can ask for court fees to be waived or refunded when seeking access to a Child Trust Fund.
Sources: • “Child Trust Fund Court Fees Waived for Parents” (Retrieved 26.04.22)• “Plan To Help Families Access Child Trust Funds” (Retrieved 26.04.22)• “Mental Capacity Act: Small Payments Scheme” (Retrieved 26.04.22)• “Child Trust Funds” (Retrieved 26.04.22)
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Last updated 29 February 2024