3.13.3 Child Trust Funds and Junior Savings Accounts for Looked After Children |
PLEASE NOTE
New Child Trust Funds ceased in January 2011. The section of this chapter relating to Child Trust Funds applies to children born between 1 September 2002 and 2 January 2011.
This chapter was updated in March 2012, to take account of the ending of new Child Trust Fund accounts, and the announcement by the Government of Junior Individual Savings Accounts (ISA’s).
Contents
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 on or after 1st September 2002 and on or before 2 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 (See Section 1.2, Who is Eligible?, below) 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 on or after September 2002 and on or before 2 January 2011 are eligible for the child trust fund if child benefit has been awarded for them for at least one day before 4 January 2011 , they live in the UK and they are not subject to immigration restrictions.
There are special rules for looked after children (see Section 7, Child Trust Fund and Looked After Children).
1.3 How Does the Child Trust Fund Work and how Much is it Worth?
For children born on or after 1st September 2002 and 1 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 2 August and 2 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 was then able to 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 opened an account for the child.
Children whose 7th birthday fell between 1 September 2009 and 31 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 Looked After Children
There are special rules for looked after children as child benefit is not payable to them whilst they are looked after. If a child benefit award was made for an eligible child before he or she came into care, s/he was eligible for the fund account in the usual way.
Where a child came into care soon after birth, the Inland Revenue were able to open 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 manage a child trust fund account. Where possible, the looked after child’s parents must be encouraged and helped to take on this responsibility.
1.8 Roles and Responsibilities of Local Authority
Local authorities must make returns to HMRC as follows:
Returns for periods up to 6 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 looked after children who were:
- Born after 31 August 2002 and before 3 January 2011; and
- Who became looked after for the first time before 3 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.
Returns from 7 April 2011 onwards
From 7 April 2011, local authorities must make a return each month of any looked after children born after 31 August 2002 and before 3 January 2011, and under the age of 16 at the end of the return period who, 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 CTF 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 7 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 3 January 2011 need be included in any return to CTFO.
Top-up Process - Local Authorities were able to make top-up payments of £100 per year to children Looked After between 1 April 2007 and 31 December 2010. 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 ISA's?
Junior ISA's 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 ISA's are for building long-term assets, rather than day-to-day savings.
2.3 Who Can Pay Money into Junior ISA's?
Anybody can put money into a Junior ISA. The total limit for payments into Junior ISA's 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 CTF's until their 18th birthday, when they can access their savings. Junior ISA's were designed to replace CTF's 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 in the summer of 2012.
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