Child Trust Funds and Junior 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 on or after 1 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?) are entitled to this account including children in care.

1.2 Who is Eligible?

Children born on or after 1 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 1.7, 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 1 September 2002 and before 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 could then open a Child Trust Fund account for that child with an approved Child Trust Fund 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 1t 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 Trust Fund. For further details click here.

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 were special rules for looked after children as child benefit is not payable to them whilst they are looked after. If a child benefit award had been made for a 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 opened a Child Trust Fund account for the child.

Even when the Local Authority had Parental Responsibility under a Care Order, they were not entitled to open or manage a Child Trust Fund account. Where possible, the looked after child's parents were encouraged and helped to take on this responsibility.

1.8 Roles and Responsibilities of Local Authority

The requirements for Local Authorities to send returns to HMRC were/are as follows:

Returns for periods up to 6 April 2011

Local Authorities were required to 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 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 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.

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.

N.B. 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. The Junior ISA for Looked After children scheme replaces the support previously provided through Child Trust Funds (CTFs).

Looked After children born between 1 September 2002 and 2 January 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.

2.2 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.

Junior ISAs automatically turn into a regular ISA when the child turns 18.

2.3 Eligibility for a Junior ISA

All children under the age of 18 who live in the UK and who are not eligible for a Child Trust Fund (i.e. were born before 1 September 2002 or after 1 January 2011) are eligible for a Junior ISA.

A Junior ISA will be opened for every child (if they do not already have one) who has been Looked After for any continuous period of 12 months or more, starting on or after 3 January 2011, and who is not eligible for a Child Trust Fund. The Government will provide an initial £200 payment to open the accounts. This includes children who are subject to a Care Order and who are accommodated under Section 20, whether in residential care, with a foster carer or at home.

2.4 Who can Pay Money into Junior ISAs?

Anybody can put money into a Junior ISA. This can include carers, Local Authorities or young people themselves. The total limit for payments into Junior ISAs is £4,080 in each tax year. Persons wishing to do this are advised to access the Share Foundation website and complete a donation form.

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.

2.5 Opening and Managing Accounts

The Department for Education has contracted The Share Foundation to administer the scheme until the end of March 2019. The Share Foundation will open and manage accounts using independent selection advice while children remain Looked After. They will also seek to raise additional funding from charitable sources for distribution to the accounts, and support the financial education of looked-after children at appropriate times so that they can understand how best to use the financial asset of their account.

2.6 16 and 17 year olds

Once their account is opened, 16 and 17 year-olds 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. Local Authorities should, as they deem appropriate, use materials provided by The Share Foundation so that 16 and 17 year olds they are looking after, and care leavers, may assume investment control in this way.

2.7 When a Child Ceases to be Looked After

When a child stops being Looked After because they have reached the age of 18, the Local Authority should use the materials provided by The Share Foundation to ensure they may access their matured accounts. As a child approaches 18 years old the Local Authority automatically receives a Maturity Option Form. This is given to the child's social worker who makes contact with the child to help them complete the form. Following this, release of funds usually takes approximately 12 weeks. A form of ID for the child is required as this is sent to the Share Foundation along with the Maturity Option Form. This is usually a certified copy of the ID.

When a child stops being Looked After before the age of 16, the Local Authority should use the materials provided by The Share Foundation to ensure the person with Parental Responsibility for the child is aware of the account and encourage them to take the necessary steps to assume control of the account. If the child leaves care aged 16 or 17, either they or their parent or carer could assume control of the account, if the child has not already done so.

2.8 The Role of The Share Foundation

The Share Foundation will contact all Local Authorities requesting information on eligible children such as the name, gender, date of birth and date they first became Looked After for 12 months or more. Local Authorities must provide that data so that children who they are, or have been, looking after can receive the payments to which they are entitled.

The Share Foundation have made initial contact with Local Authorities and made the first data request during the Autumn of 2012. Once initial returns have been made, further returns will be required at a frequency to be agreed between The Share Foundation and the Local Authority. All contacts wishing to discuss specific information with The Share Foundation must be authorised in advance by inclusion in these returns.

The Share Foundation will provide Local Authorities with an information pack on the scheme, including a set of standard guidance sheets which the Local Authority can use with carers, parents and children as they deem appropriate. This may be so that the carer or child can pay additional funds into accounts and use them to build long-term savings. Or it may be so that they can request the account is changed to meet specific criteria, such as a Sharia-compliant account.

2.9 What Actions must the Local Authority take?

Unless there are exceptional reasons that justify a variation, Local Authorities must:

• Provide The Share Foundation with a named contact for dealing with all aspects of the Junior ISA scheme – This is managed through the Throughcare Service;
• Respond to requests for information from The Share Foundation, to enable them to open the Junior ISAs and draw down the £200 payments;
• Ensure that there are effective and proportionate security arrangements safeguarding the integrity and confidentiality of the data to be sent to and received from The Share Foundation, in full compliance with the Data Protection Act 2018;
• Once an account has been opened, ensure that (as an integral part of the care planning review, and where it is appropriate to do so), the carer, parent and child are made aware of the account;
• Once a child stops being Looked After, notify The Share Foundation and provide the necessary information to the person with Parental Responsibility for the child (and the child if 16 or 17 years old) so that they may take over the management of the account. In addition:
• Independent Reviewing Officers should ensure Local Authorities carry out their duty as good corporate parents so that children who are eligible for a Junior ISA receive funding and, where appropriate, they and their carers and parents receive suitable advice about their accounts, both while they are Looked After and when they cease to be Looked After.