Child trust fund ISA link opens opportunities for advice

Now that Child Trust Funds can be rolled over into ISAs, it is worthwhile intermediaries taking an interest in making recommendations for investment of CTFs – even though there may be no commission or fees involved.

Money in a CTF cannot be touched until the child is 18 and if the adviser has made some good selections, the chances are they will be asked to continue managing the funds in an ISA.

Next week is Child Trust Fund week which takes place from 15th to 20th January and it’s a good time to remind clients about uninvested CTF funds.

According to the Treasury, almost 2.5 million CTF accounts have already been opened. But over a quarter of parents have failed to invest their vouchers, so there is still plenty of scope for offering advice.

Figures up to 20 December 2006 show that for vouchers issued for the quarter ending September 2005 (i.e. those expiring in the quarter ending September 2006), 74% of parents used their voucher to open an account for their child.

The number of accounts opened to 20 December for vouchers issued to the end of September 2006 is 2.46 million. Of these 1.95 million accounts were opened by parents and just over 0.5 million accounts were allocated for children by Her Majesty's Revenue & Customs (HMRC).

‘It is really encouraging that three in four parents are now opening accounts for their children, but we want to do more,’ said Ed Balls, economic secretary to the Treasury. ‘That is why I will be launching the first Child Trust Fund Week this month.’

‘We want parents, grandparents and whole families to use the Child Trust Fund and we are asking schools to start using the accounts to teach kids about money and savings. And for children who still have Christmas money unspent, I'd encourage parents to put that money in their Child Trust Fund account.’

‘To kick off the week, I will be writing to all MPs with details of account opening rates for their constituencies to enable them to consider ways of promoting awareness of the Child Trust Fund in their local areas,’ Balls said.

The Child Trust Fund was introduced for all children born in the UK on or after 1 September 2002, with a £250 voucher from the Government to start off each child's account, and a further £250 paid into the account at age seven. Children from lower-income households receive an extra £250 top-up at birth and at age seven.