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Child Trust Funds

Child Trust Funds INCOME TAX

New legislation comes into force on 6 April 2017 that makes a number of changes to the way Child Trust Fund (CTF) accounts work. The main change is the removal of the requirement for lifestyling. ‘Lifestyling’ is the process by which the account provider adopts an investment strategy that aims to minimise variation in the capital value of a CTF caused by market conditions, as the account nears maturity by increasing the proportion of less risky investments. There are also minor changes and updates to the CTF rules.

Children born after 31 August 2002 and before 3 January 2011 were entitled to aCTF account provided they met the necessary conditions. As the legislation currently stands, the process of lifestyling a stakeholder CTF should have started by the time the account holder reaches 15 unless the registered contact for the account (usually the account holder’s parent) has instructed otherwise. This would have meant that CTF providers would have had to start lifestyling up to 327,000 of their accounts by 2017-18 at the latest. The decision to remove the lifestyling requirement followed a consultation that took place in the last quarter of 2015.

Since CTFs were launched back in 2002 there have been many changes including the introduction of the Junior ISA which effectively replace CTFs. It is also now possible to transfer CTF funds to a Junior ISA. The current subscription limit for both CTFs and Junior ISAs is £4,080. These limits will increase to £4,128 from April 2017.

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