“When money realises that it is in good hands, it wants to stay and multiply in those hands.”
In three weeks’ time we will celebrate the ‘Coming of Age’ of the Child Trust Fund, an account already set up and owned by six million children in the United Kingdom. On Thursday 6th September at 4 pm in the House of Commons, The Share Foundation and The Share Centre are hosting a 16th birthday party in order to celebrate this milestone.
If you live in the United Kingdom and have a 15 year-old child or grandchild, we’d like to invite you to come and join the party. There’ll be cake and balloons as you’d expect, and the main speaker will be Ruth Kelly, who was the Treasury Minister who first introduced the scheme in 2002. Spaces are limited, so please RSVP as soon as possible using the invitation acceptance link button in the panel to the right of this letter.
So this week we look at this significant stepping-stone for young people’s investment and how those entering their last two years before adulthood can make best use of the opportunity.
Over the next 11 years those six million young people will be able to take control of their Child Trust Fund, before getting access to their money when they reach 18 years of age. Up to their 16th birthday the account has been (or should have been - see below) looked after by their parents or guardian, but they can take control of their own account for the last two years before they reach adulthood.
Finding a Child Trust Fund
We say ‘should have been’ because we know that one million of the six million Child Trust Funds are ‘Addressee Gone Away’: in other words, lost. This was addressed in our commentary of 8th May ‘Child Trust Funds – drawing targeted opportunity out of a universality muddle’, but the good news is they can be found. The Share Foundation took over management of the Child Trust Fund scheme for young people in care from the Official Solicitor last autumn, and since then has worked with local authorities and the HMRC to re-link over 7,000 accounts. When the scheme was transferred, less than 3,500 out of 16,000 eligible children were properly linked, so this represents concrete proof that lost accounts can be re-coupled to their rightful owners.
So, if your child or grandchild was born between 1 September 2002 and 2 January 2011 (the Child Trust Fund years) and their account is missing, don’t worry! You too can find it, using The Share Centre’s ‘Find My CTF’ page (tiny.cc/findctf) which provides a straightforward explanation and a link to the HMRC facility. Meanwhile this poster has been distributed to all secondary schools throughout the United Kingdom, for them to display over the years ahead.
Helping a young person to manage their Child Trust Fund
Most children have the basic ‘Stakeholder Child Trust Fund’, invested in a single fund and receiving little attention. It would typically be worth between £500 and £1,500 now: however, on reaching 16 years of age, a young person is allowed to manage their own account – that means being able to choose their account provider and their investments. The Share Centre is one of the few providers to have a special self-select low cost (non-Stakeholder) Child Trust Fund called the ‘Child Investment Account’ which makes this possible, and this account can be invested in a wide range of shares and/or funds.
Of course, learning about money is what it’s all about - and there’s two risk-free and cost-free ways of doing that:
- Share Radio’s ‘Managing My Money’ course, an eight week audio podcast course with slides: ‘Week 5’ is all about savings and investment;
- The Share Centre’s Practice Account, in which a young person can invest virtual money and get used to the delights - and otherwise - of the stock market without exposing their real money; and
- There’s a good young person’s guide to budgeting, saving and investing called ‘Your money, your future' produced by Rathbones, an investment manager.
When they’re ready, their Child Trust Fund can be transferred from their existing provider to a self-select account such as The Share Centre’s Child Investment Account, and authority can be transferred to the new 16 year-old so that they can take control.
Over the next 11 years we hope that many young people will experience handling real investment money through their Child Trust Fund for the first time, thereby setting up a whole generation who understand first-hand the benefits of having a store of savings and investment to work from. That’s an important change from those who are 20 years older, where the number still living with their parents has risen by 37% in the decade since 2007: see our commentary on 26th March: ‘Investing in the next generation – are we?’
Cascading wealth from generation to generation is a key part of egalitarian capitalism and every effort should be made to seek out the lost accounts and use the Child Trust Fund opportunity properly.
So do join us on 6th September at the House of Commons with your 15 year-old, and let’s celebrate these opportunities ahead.
Please note: that Share Premium Ltd., which operates Share Radio, is an Introducer Representative of The Share Centre Ltd., who are authorised and regulated by the Financial Conduct Authority.
Also, with respect to the Child Investment Account: if your investments fall in value, you could lose money. Tax allowances and the benefits of tax-efficient accounts could change.