Anyone seeking advice on Child Trust Funds should speak to the provider of the fund, or their financial advisor, now that arguably one of the Labour Government’s better initiatives has been cut by the Conservative/Liberal Democrat coalition.

People seeking advice on Child Trust Funds need to know the basics, especially that until the legislation is passed by the new Government, it’s business as usual.

So for those seeking advice on Child Trust Funds, the best is to continue as before. Child Trust Fund vouchers will still be issued to qualifying parents and those that have already been issued, will remain valid until they have naturally expired. What’s more, Her Majesties Revenue & Customs (HMRC) will keep opening Child Trust Fund accounts in cases in which the voucher has not been used by the expiry date and Government contributions will remain at the current level.

The advice on Child Trust Funds is therefore straightforward: it’s a matter of waiting until legislation calls the programme to a halt and details how it will do that. Then the new Government has indicated that it will reduce contributions at birth and stop contributions altogether at age seven, from 1 August 2010. New Child Trust Fund vouchers will stop being issued by HMRC from 1 January, 2011.

Advice on Child Trust Funds will likely centre on key questions, including:

Question 1: I already have a Child Trust Fund for my child. What happens now?
Answer 1: They will continue as before, with the same basic rules and limitations governing their use. No withdrawals until 18 and the investment will still benefit from a tax free status. And friends and family will be able to top up the fund to a maximum of £1,200 per year.

Q2: I have a voucher, but haven’t used it yet. Is it still valid?
A2: Yes and even if you don’t use it, HMRC will start an account on behalf of the child and let you know it has done so. The Child Trust Fund will then operate normally.

Q3: What if I’ve lost my voucher?
A4: You can get a replacement at the official Government Child Trust Fund website.

Q4: Now that the Child Trust Fund idea is being wound down, will the Government withdraw the money it has placed into the account?
A4: No. That money is safe and will operate as originally planned.

Q5: Am I able to move my Child Trust Fund account from provider to provider?
A5: Yes. The basic rules as devised at the set-up of the scheme still apply.

These are basic changes for those who are seeking advice on Child Trust Fund changes. For more details, speak to a qualified professional.

Guest Article by Neil Camp

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