4.15.4 Child Trust Fund |
Contents
1. What is the Child Trust Fund?
The Child Trust Fund (CTF) is a long-term savings and investment account for children and provides all children and young people with a financial asset that can have a significant impact on their opportunities in the future. Children born between 1 September 2002 and 2 January 2011, were eligible for a CTF if Child Benefit has been awarded for them, they live in the U. K. and they are not subject to immigration restrictions.
Please note that Child Trust Funds ceased in January 2011 and therefore this chapter is no longer relevant to children born after 2 January 2011.
2. Child Trust Fund and Looked After Children
As mentioned above, CTF accounts were usually linked to an award of Child Benefit. Child Benefit was not normally payable for children whilst they are being looked after, therefore regulations to ensure that looked after children did not miss out, were put in place.
3. Role and Duties of the Local Authority
Local authorities had a statutory duty to provide some basic information to the Child Trust Fund Office (CTFO) regarding the looked after children in their care to ensure they received their CTF account.
There were two broad processes that local authorities had to follow in respect of children born on or after 1st September 2002:
- The identification and provision of information on children who come into their care for the first time since 6 April 2005, and
- The identification of looked after children with no one (or no one appropriate) with parental responsibility.
The Child Trust Fund Office used this information to identify any children who did not have a CTF account and ensured that one was opened for them. Where there was no one (or no one appropriate) with parental responsibility, HM Revenue and Customs arranged for the Official Solicitor to manage that child's CTF account.
4. Legislative Framework
The legislative framework of the scheme was set out in:
- Section 16 The Child Trust Funds Act 2004
- Child Trust Funds Regulation 2004 (SI 1450)
- Regulation 33 of Child Trust Fund Regulations sets out the duties of local authorities. Further clarification is provided in Regulation 14A of Child Trust Fund Regulations (SI 2676)
- Child Trust Fund (Amendment No 2) Regulations (SI3382) 21 December 2004 sets out the remit of the Official Solicitor.
Regulation 33 of the Child Trust Funds Regulations 2004 sets out the local authority's responsibilities in respect of looked after children. For the purposes of these Regulations, “looked after children” are as defined by section 22 (1) of the Children Act 1989, extended to include a child accommodated by a local authority under section 17 of that Act. Any child, that qualifies as a looked after child within this definition must be reported. This includes children who are looked after and placed in voluntary homes for adoption and those on short break care, but does not include children on interim care orders under Section 38 of the Children Act 1989.
5. Information required by HM Revenue and Customs
Local authorities were required to make a return to the Child Trust Fund Office (CTFO) in HM Revenue & Customs on a monthly basis. Each monthly return runs form the 7th of a month to the 6th of the next and the local authority has 10 days form the end of the return period to send in their return. Local authorities must send a return at the end of each return period, even if it is a nil return.
The information required is a statement for each child (born on or after 1 September 2002 and entering that local authority’s care for the first time since 6th April 2006) covering:
- Name of the local authority
- Address of the local authority
- Name of the local authority officer responsible for the return
- Unique identifier for the local authority
- Child’s full name, gender and date of birth
- Home office reference number, if applicable
- Date the child first came into the local authority’s care
- Birth parent details
- Parental responsibility details
- In addition local authorities should report any child in their care born on or after 1 September 2002 whose circumstances change so that they no longer have any one appropriate with parental responsibility.
5.1 Unique Identifier
Each local authority has a unique identifier used by HM revenue & Customs for other tax purposes. The number is used for CTF purposes too.
5.2 Parental Responsibility and the Official Solicitor
On the return to the HM Revenue & Customs, local authorities have to identify either:
* An appropriate person with parental responsibility for the child and provide on the return the name and address of that individual. Where, possible, it is suggested that this should be the child’s mother, as in the vast majority of cases it is the mother that claims the Child Benefit and would therefore make the checking process easier. However, the local authority should decide if this appropriate on a case-by-case basis. This named individual will receive all correspondence from the Child Trust Fund Office relating to the Child Trust Fund account.
- OR:
- That there is no appropriate person with parental responsibility for the child based on the conditions set out in the regulations. The local authority will then have to provide the HM Revenue & Customs with:
- Confirmation that there is no one appropriate with parental responsibility for the child and under what condition of the regulations;
- A correspondence address for the child so that the Official Solicitor can contact the child and in the early years their carer;
- Any additional information that would be useful for the Official Solicitor, such as the religious beliefs that would affect the type of Child Trust Fund account that would be suitable for that child and any view expressed by the child about the type of account they want.
5.3 Looked After Children Whose Status as regards Parental Responsibility Changes
As well as identifying a person with parental responsibility or declaring that there is no such person for children who have become looked after by them for the first time, local authorities will need to send the HM Revenue and Customs information about the children (born on or after 1 September 2002):
- Who are already being looked after by them; or
- Who have become looked after by them not for the first time, and for whom there is no on one relevant with parental responsibility.
5.4 Duties after 31st August 2009
The government made a contribution to the Child Trust Fund accounts for children's 7th birthdays. This came into force after 31st August 2009.
For returns for periods after 31st August 2009, local authorities were required to provide in their monthly return, details of every child born on or after 1st September 2002 who was being looked after on their 7th birthday.
5.5 In Case of Death
The local authority must provide information about any child who has become looked after for the first time who has died during the return period, including the name and address of his/her personal representatives and proof of death (copy of birth certificate or other documentary evidence).
The HM Revenue and Customs will contact the personal representative and inform them of their entitlement to the Child Trust Fund money and how to make the necessary arrangements.
6. How Does the Child Trust Fund Work?
Once eligibility for the Child Trust Fund has been accepted, a voucher worth £250 for the initial Government payment and an information pack was sent to the Child Benefit claimant, who was usually the parent. Parents of looked after children are encouraged to take on the management of their child's Child Trust Fund account in the same way as other parents.
A person with parental responsibility for the child can use the voucher to open a Child Trust Fund account for that child with an approved CTF provider. There is a range of different CTF accounts to suit people’s needs.
The person with parental responsibility, who opens the CTF account, becomes the ‘registered contact’ for the account and only that person is responsible for looking after the account. The child c/o the ‘registered contact’ will be sent the annual statements of the account, and the registered contact can move the account to another provider or change the type of account.
Any one – family, friends, the child themselves – can contribute to a child’s CTF account up to a total of £1,200 a year.
Local authorities are free to contribute to a CTF. If they do not have the details of a child’s CTF, the local authority officer responsible for the monthly returns to the HM Revenue and Customs can ask the CTF Office for this information.
7. Who Can Access the Money in the Child Trust Fund?
The money in a Child Trust Fund can only be taken out by the child and not until they are 18 years old. The account and the money in it belongs to the child, although it is managed by a person with parental responsibility until the child is 16 years old, when the child takes over control of their own account. Once the child is 18 there will be no restrictions on how they choose to use the money in their account. They are able to use the money as they think best.
Early access to the account will be available to children who are terminally ill. A person with parental responsibility (including a local authority) can request permission from HM Revenue and Customs to withdraw funds from the account of a terminally ill child.
Local authorities should contact the CTF Office to advise that if a looked after child is terminally ill and the parent or child would like to access the CTF account. CTF office will request written evidence that the looked after child is terminally ill and forward this to the Department of Work and Pension’s medical services provider for checking.
Once evidence has been checked with the Department of Work and Pension’s medical services provider the CTF office will advise the CTF provider to grant early access to the registered contact. The rules relating to access for terminally ill children are in The Child Trust Funds (Amendment) Regulations 2004.
7.1 Child’s Full Name, Gender and Date of Birth
It is important that the full, accurate name and date of birth of the child is given to assist HM Revenue and Customs to identify each child. This enables them to check whether the child already has a CTF account.
7.2 Home Office Reference Number
This number will only refer to children who are not normally a resident of the UK. All children who have a time limit on their stay in the UK have a Home Office Reference number that the Home Office provides to local authorities so they can apply for funding for the child. Where a child being looked after has a Home Office reference number, this should also be provided on the return.
7.3 Parental Responsibility
Only a person with Parental Responsibility for a child can manage that child's Child Trust Fund account, with the exception of a Local Authority.
Although local authorities do sometimes have Parental Responsibility for their looked after children, they cannot manage Child Trust Fund accounts. Any responsibility for the management of the Child Trust Fund accounts of looked after children could expose local authorities to liability for financial and investment decisions its employees are not best placed to take. They are therefore excluded from managing Child Trust Fund accounts by section 3(8) of the Child Trust Funds Act.
In these cases where there is no one or no one appropriate with Parental Responsibility, the Official Solicitor will manage the Child Trust Fund accounts of these children. The Official Solicitor will try to take into account and respect any cultural or religious upbringing or wishes of the child when deciding what type of Child Trust Fund account to have for the child.
For a child to be treated as having no one or no appropriate with parental responsibility, they have to be looked after by a local authority and fall into at least one of the following conditions, as set out in the regulations.
Condition 1: where there is no person, or no person other than the local authority, who has parental responsibility for the child.
Condition 2: where it is part of the care plan for the child that the child will live permanently away from the home and will not have face to face contact with any parent having parental responsibility for the child.
Condition 3: where an order has been made under section 34(4) of the Children Act 1989 authorising the local authority to terminate contact between the child and a person with parental responsibility and there is no one else in a position to manage the child’s CTF account.
Condition 4: where the Court of Protection has appointed a receiver for a person with parental responsibility or determined that such a person is a ‘patient’ for the purposes of section 7 of the Mental Health Act and there is no one else in a position to manage the child’s CTF account.
Condition 5: where the child has been lost or abandoned (within the meaning of section 20(1)(b) of the Children Act 1989) and there is no prospect for the foreseeable future of reunification. (This includes children who are given up at birth whose parents want no contact).
Condition 6: an adoption agency or local authority has been authorised to place the child for adoption under section 19, or by a placement order under section 21, of the Adoption and Children Act 2002
The Inland Revenue will forward the relevant information to the Official Solicitor who will take over the management of these CTF accounts. This means that they have the ability to move the CTF account to a different provider or change the type of CTF account if they feel this is necessary and for the benefit of the child. Having taken control of a CTF account, the Official Solicitor will write to the child explaining that they have taken over the account, what their role as registered contact will be and provide contact details.
The Official Solicitor should be in regular contact with the child, as they will send a copy of the annual statement to the child, so that the child and its carers are aware of the account and where it is, in case they would like to contribute to the account. The Official Solicitor will also write to a child when they move a child’s CTF account, explaining why they have moved the account and letting the child and his/her carers know where the new account is. The child or the child’s carer could also contact the Official Solicitor with any queries about the account. The child and carer can make their preference known but the decision lies with the Official Solicitor on what s/he thinks is best for the child.
Although local authorities will not generally need to have direct contact with the Official Solicitor, there may be occasions when the Official Solicitor will need to contact the local authority for further information, for example if more details are required about a child’s religious beliefs. The contact named on the return sent to the Inland Revenue will be passed on to the Official Solicitor for such queries.
It may be likely that the correspondence address for the child will be care of the local authority until the child is old enough to receive and handle such correspondence themselves. However, if the child is in a stable long-term foster placement it may be more appropriate to use the foster family’s address as the correspondence address. This decision will need to be taken at the discretion of the local authority.
7.4 Handing Over the Management of a Child’s Child Trust Fund Account from the Official Solicitor
If, once the Official Solicitor has taken over control of a child’s Child Trust Fund account, someone appropriate with parental responsibility emerges (e.g. an adoptive parent) then the local authority should encourage that person to contact the Official Solicitor to have responsibility transferred to them.
The Official Solicitor will not know whether this person is appropriate or not and so will contact the local authority for confirmation. The local authority will need to check to ensure that the person does have parental responsibility and does not fall within the conditions described above and confirm this for the Official Solicitor.
Once a child reaches the age of 16, the Official Solicitor or Accountant of Court ceases to have control of that Child’s Trust Fund account as the child can manage their own Child Trust Fund account.
7.5 In Case of Death
It would be helpful if local authorities could explain to parents that they are entitled to the money in their child’s Child Trust Fund account and explain that they need to contact the provider of their child’s Child Trust Fund account for more information. If parents so not know the details of their child’s Child Trust Fund account, they should contact the Inland Revenue.
8. When a Looked After Child Changes Local Authority
If a looked after child moves to another authority area, the authority with legal responsibility for the child remains responsible for the Child Trust Fund returns. Where the new local authority has legal responsibility, it will need to make a return that the child has entered its care.
9. When a Child Leaves the Care of a Local Authority
When a child leaves its care, the local authority should encourage the child or the new carers of the child to take an interest in their Child Trust Fund account. For example, adoptive parents should be advised to contact the Inland Revenue in order to obtain the details of their new child’s CTF account so that they can take an active role in the account. The Pathway Plan co-ordinated by the young person’s adviser currently maps out a route to independence for care leavers including assessing and meeting their financial needs. The Child Trust Fund should be included automatically into this financial assessment of their needs.
10. Financial Education
In general looked after children will receive financial education in relation to their Child Trust Fund account through the school system, in the same way as other children. As children get older, local authorities could direct children in tier care to the dedicated Child Trust Fund website for more information regarding the Child Trust Fund and financial education.
11. Local Authority/Trusts Contributing to a Child’s Child Trust Fund Account
- Anyone can contribute to a child’s CTF account, including local authorities/trusts, up to the annual limit of £1,200 in total.
- In most circumstances local authorities/trusts will be able to obtain the necessary details of the CTF account from the child, its parents or other person with parental responsibility.
- However, if this is not possible, the local authority/trust officer responsible for the monthly returns to HMRC can ask CTFO for the details. This information will not be distributed routinely. HMRC will be able to tell local authorities/trusts who the provider is and the child’s unique reference number. The local authority/trust will then need to liaise with the provider to get the precise details necessary to put money into the account.
Further guidance regarding the Child Trust Fund is available at Child Trust Fund website (the site also provides access to information for parents and carers in several different languages in the form of downloadable leaflets).
12. Procedure for Completion of the Return
Information Analysts within Children’s Services Information Team (Social Care) are responsible for all issues relating to the Child Trust Fund return except for the signing off process. The return is signed off by the Divisional Manager or Assistant Divisional Manager/Children’s Resources every month. The deadline for the return of the information to the Inland Revenue is the 17th of each Month.
Children for each return are identified using the Business Objects reporting tool (information is extracted from the Swift client system).
Analysts then contact the relevant Social Worker or Team Manager for the child who is asked to provide information regarding the birth parent/s and also details of adults with parental responsibility of the child. The correct procedure should be that this information is entered onto Swift. However, this is not the case as yet and therefore Analysts in the interim period have needed to contact workers directly for the information.
All required information for children in the monthly return is faxed (to a secure fax machine) to the Inland Revenue by the deadline.
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