Child Trust Fund changes
An HMRC consultation last year examined whether Child Trust Fund (CTF) accounts should be subject to lifestyling.‘Lifestyling’ is the process by which the account provider adopts an investment strategy that aims to minimise variation in the capital value of a CTF caused by market conditions as the account nears maturity. This is done by increasing the proportion of lower risk investments.
Children born after 31 August 2002 and before 3 January 2011 were entitled to a CTF account provided they met the necessary conditions. As the legislation currently stands, the process of lifestyling a stakeholder CTF must have started by the time the account holder reaches 15 unless the registered contact for the account (usually the account holder’s parent) has instructed otherwise. This meant that CTF providers would have to start lifestyling up to 327,000 of their accounts by 2017-18 at the latest.
The government has now considered the responses received to the consultation and believes that the current lifestyling legislative requirements are no longer necessary mainly because of existing flexibility that allows CTF holders to transfer CTF funds to a Junior ISA. The government will therefore remove the requirement that stakeholder CTFs must be subject to lifestyling. Legislation to amend the Child Trust Funds Regulations will be introduced to Parliament later this year.