Child Trust Funds

House of Lords written question – answered at on 20 April 2009.

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Photo of Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay Spokesperson for the Treasury, Spokesperson for Work and Pensions

To ask Her Majesty's Government what criteria and guidelines were used by HM Revenue and Customs to decide what type of account to open on behalf of the recipients of child trust funds.

Photo of Lord Myners Lord Myners Parliamentary Secretary, HM Treasury

There are three types of child trust fund (CTF) accounts—stakeholder, cash and non-stakeholder shares accounts. Parents can choose which type of account to invest their child's money in, and can transfer between account types at any time.

If parents do not open an account within one year, HM Revenue & Customs (HMRC) will open a stakeholder CTF account for the child, ensuring that no child misses out on the benefits of a CTF account.

The Government have put in place a number of rules for stakeholder CTF accounts. The child trust fund regulations require CTF providers to diversify the investments within a stakeholder account. They also require assets held in child trust fund accounts to be moved into investments with lower risk and return profiles when the child reaches 13. This process, known as lifestyling, will further reduce the risk of investing in equities as CTF accounts reach maturity. Furthermore, account charges on stakeholder CTF accounts are capped at a maximum of 1.5 per cent per year.

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