Child Trust Fund Webchat

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Transcript

H: Jayne Constantinis, host

M: Michele Stevens, Child Trust Fund expert


H: Hello and welcome to the Lifestyle Show brought to you today by the Child Trust Fund, I’m Jayne Constantinis. Now, how many of you mums and dads out there have heard of the government’s Child Trust Funds Scheme? Well most of you probably, but how many of you have taken advantage of what it has to offer, and how many of you have thought ahead to what your child might spend the money on when it gets access to it? Well to answer all of those questions and many more, we’ve got a Child Trust Fund expert in the studio with us today, Michele Stevens. Thanks very much for coming in to talk to us, and remember of course as usual it’s a live show so if you’ve got a particular question just type it in the box on your screen, send it to us with your name and we’ll get through as many as we can during the course of the show, and in fact we’ve had quite a lot of questions in already, and some of them asking in very basic terms, what is it and how does it work? So can we start with that, at the beginning?

M: Well Child Trust Funds are a long term savers investment accounts specifically for your children, trying to encourage parents to consider their child’s future and to start saving now, because it matures when they’re 18

H: Ok. Is every child eligible for one?

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M: Every child that’s born in the UK on or after 1st September 2002 and eligible for child benefit will be entitled to receive the Child Trust Fund voucher

H: Ok and how do you get access to the money, is it just sent through the post or do you have to fill forms in or what?

M: Lucky enough, made it quite convenient – no form filling. You -

H: Phew!

M: Yes. You claim for your child benefit send that off, as soon as you start being paid your child benefit you’ll get an information pack in the post and then you’ll get your voucher. So you get the information pack first which gives you time to digest what you have to do, you know what account do I choose, and then you get the voucher, so you’ll have an idea what to do

H: Ok so anybody can get one, so people maybe thinking I’m not because I’m not whatever eligible or I don’t earn enough or whatever – there are no stipulations?

M: No no stipulations, but you have to be living in the UK and eligible and receiving child benefit, and born on or after 1st September 2002

H: And does it matter how many children you’ve got, are they all eligible?

M: As long as they’re born after 2002 and you can have child benefit then yes, get the child voucher – so if you have twins, my sister’s got twins, she would have – if she’d have waited a few years – she would have been entitled, she would have had two sets of payments

H: Ok, I’m only asking these really basic questions because it – when I got mine it seemed too good to be true, I was being given, I was being given money for doing nothing for my child

M: Fantastic – well no you gave birth

H: Oh I see, actually I needed more than 250 quid for that!

M: Yes no but it’s a good way, it’s a good kick start-to-start thinking about your child’s future because it goes so fast. My daughter’s going to be 18 in February, and you know it’s just – looking back 18 years I’m like where has it gone

H: Where has it gone?

M: But for the future, you can’t imagine 18 years in front

H: Ok great, so we’re clear now about who’s entitled to it. To find out how much mums and dads do know, we went out onto the high street and filmed a few people and asked them the question “do you know what it is?” Let’s see what their responses were

M: Ok

Video footage

“We’ve got Child Trust Funds for both our children, age 4 and 2, we got them when they were born and we took the government’s money and put them in them”

“The £250 thing, yes you get that when the baby’s born. It just stays in the account and she can’t touch it until she’s 18 and then you can just add to it, and if you put £1000 in over the year you get some sort of contribution. I don’t know, that’s about all I know about it”

“It’s not really that much. All I know is that I’ve got it and it just went straight into an account and then the interest builds up on it. Is that right? That’s all I know”

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“No I don’t think so, no. Yes I have, course I have – is when children get money when they’re born and they put it – yes I know, yes yes”

“I don’t know anything, I’m really no good at this sort of thing, I’m really not”

“Well he’s got one already so I know that the government put £250 into it. I’m not sure about years after though, I know that the children born after a certain date are entitled to £250 and the government puts that in for you, it’s like a savings plan, and you’re entitled to that, and it’s invested in stocks and shares, so basically if the price of shares go up then you make a profit, if not then obviously you lose some money, but you can put money into it, extra money into it as well yourselves as mums and parents and whoever wants to put in with you. So that’s basically what I know about it”

H: Interesting isn’t it, some people know a lot, some people pretty vague about what it is, and we’ve had a good question in from Fiona from Watford who asks “is it £250 every year or just a one-off?”

M: No

H: Wishful thinking, wishful thinking

M: It would be nice to have £250 every year, no you get it - £250 when they’re born and as I said after they’ve claimed child benefit, the voucher’s sent in the post, you would choose which account you wish to put that £250 in, and then when the child is 7 you’ll receive another £250 from the government

H: Ah now I didn’t even know that

M: Yes

H: That’s interesting

M: Yes so when they’re 7 yes

H: Ok so let’s just go back a step, we’ve got the voucher and it is a physical voucher is it?

M: it’s a physical voucher and it has a unique reference number on it and that’s your identifier, you take that down, you need those details because as you’re opening the account for your child you need to have the unique reference number, it’s all there on the voucher, then you’ll obviously get the provider’s account details because you’re going to be monitoring it for them

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H: Ok so let’s talk about this opening an account, what does this mean, where can we open an account, what do we do with the money once it’s in there?

M: Financial institutions, so credit unions, Family Provident, banks, building societies, anything like that. The full list is on the website to help you make the choice, and you’ve got three choices of accounts to choose from, you’ve got a shares account, stakeholders account and a normal savings account, now all of them is up to you, it’s the choice – you’re given options so the parents can make the best choice for their child’s future

H: Right and can you – without going in to too much detail, what is the difference between those three types of accounts?

M: Savings is just cash based so you just put the £250 in and it just grows with the interest and contributions can be made. Stakeholder account is slightly more riskier but it’s a protected risk, it’s managed, the fact that it’s saving some in shares and then when the child’s 13 it becomes less risky for the shares so that there’s the growth until they’re 18. Then the last one is the shares account, now that is a high risk account, but the most potential to make the most money for your child

H: Ok

M: So there’s the choice out there and on the website there’s all the questions that you can take along, print off and take along to your provider and ask them all these questions about -

H: Oh ok

M: Any of the accounts, so it’s got all of the advice there

H: And does each provider offer those three options or do you have to go to different people depending on the level of risk you decide you want to take?

M: Yes all have to offer the stakeholder accounts, whether they offer the savings or the shares account is totally down to the providers, and in the booklet, I was talking about the information pack that comes out, on these pages, these pages here, you’ve got your choice and it says if you’re happy to invest in shares, you understand that investing in shares and taking risks might mean you might not get it all, and you’ve got the chart that takes it all the way through about the savings account, the stakeholder account and the shares account, and it’s quite good

H: And this – just go back to this business about when the child is 7 because I’ve been through the process and I’ve forgotten that so -

M: Well we made it easy for you, you don’t have to claim it, it will be awarded automatically to you

H: Right

M: It will come up – because the first children that can claim will be 5 now, raising fives so starting primary school and that, so at 7 -

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H: And is there going to be another one at 14?

M: Not that I’m aware of but watch this space, you never know do you?

H: Ok

M: But no at 7 – so when they’re born and at 7

H: Great. Let’s get back to the high street

M: Yes

H: And ask our friends again and if they’ve opened their accounts

M: That’d be interesting

H: Yes see what they have to say

Video footage

“With our first one we did, with the second one we forgot for a while and then kind of got round to it a bit later but we did them both in the year yes”

“I’ve activated one, I’ve still got yet to do his, I keep forgetting to do it – [really?] yes but that’s all I know”

“I have yes”

“No. I’ve only just got her registered so – she’s only a month old, so I haven’t filled out any forms or anything yet”

“Yes soon as the information come through the post, and as soon as that came through the post then I activated it straight away for him, so yes”

“Yes I did it, it took me a while but I did do it and hopefully one day it will be worth something”

H: Interesting another kind of cross section of views there, and there’s a good question here from Rachel who wants to know “can anybody else pay money in or is it just the parents?” And I want to ask you as well, who manages this account?

M: The account is – well that’s a double edged sword isn’t it, the account is managed – you manage as the parent because you will check the statements and the investment, because you can change the accounts and the provider at any time if you’re not happy with the performance, so manage as in the money will be the provider that you’ve chosen, but you will actively manage because you’re taking an involvement, and yes anyone can contribute to the accounts – grandparents, friends, anyone, relations, people off the street, you know, I like your child, £10 – anyone, just anyone can do it, up to a value of £1200 per year

H: £1200 per year, that’s the maximum?

M: Yes

H: Ok. And that’s the same whichever of the 3 options you go for?

M: Yes

H: Which account has the ability for other people to pay in

M: Other people to pay in, so like when they’re first born people tend to give you money

H: Yes

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M: Christenings or naming ceremonies people can give presents and that -

H: It’s a really good idea

M: And when they’re little you can take the money for them and put them in, but when they get to teenagers you’ve got no chance of getting the money off them

H: No absolutely

M: So make the most of it

H: And it’ll save all that pink plastic from cluttering up my house!

M: Yes

H: Brilliant. And so we’ve opened the account, we’ve paid in, we’ve encouraged grandparents to contribute as well

M: Yes

H: Tell us what happens then at the end of the process, when the child becomes 18?

M: Well when the child becomes 18 it’s theirs to do with the money whatever they want but there is a transition period that when they’re 16 they will be encouraged to take control themselves, not access the money, that can’t happen until they’re 18 but they will, as part of financial, you know getting children ready to go out

H: Yes, good idea, yes

M: They’ll be able to take responsibility for them, obviously with their parents guiding them and everything, and then at 18 they can use the money for whatever they want

H: It’s really good isn’t it to encourage this concept of saving and building for the future

M: Yes definitely

H: There’s not enough of that around at the moment is there?

M: No well I wish something like this had been around when my two were first born, it would have been good

H: Yes, yes. Rachel has sent us a question, can we tell her which fund to invest in to get the best return? Difficult one that

M: Unfortunately no we can’t because it’s down to personal choice, you know you go with one particular bank, building society, financial institution because you like them or maybe you like their ethics and what they do, so it’s down to you to choose and it’s – you know you make that choice for your child

H: Let’s just be clear about something you said earlier, you can’t get access to the money -

M: No you can’t

H: At all

M: At all

H: Until they’re 18

M: Until they’re 18, you as a parent cannot withdraw any money for you to use, you can change the account provider or type of account that you want but you cannot withdraw it to spend the money

H: Ok. Now Mia has sent us a question that probably is on the lips of many people. She doesn’t understand how the voucher works, how does she get to use it, is there a use-by date? She got hers a while ago and hasn’t done anything with it, does that matter?

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M: Right, well there’s an awful lot there isn’t there, shall we take one bit at a time?

H: Yes

M: The voucher will come to them in the post, there will be information beforehand, there’s leaflets in antenatal clinics and in the different Bounty packs and stuff like that, and as I said when you claim the child benefit you’ll get a pack first, then you’ll get sent the voucher, yes you’ll need to keep that in a safe place because that is money and you need that voucher to be able to open the account, whether you do an internet-based account or not, you need that voucher because as I said earlier it has a unique reference -

H: Right

M: Number on it

H: Yes

M: And it identifies it’s your child’s money, and go through it that way. If you’ve lost it, don’t worry, go onto our website and you can request a replacement voucher

H: Oh ok

M: As for a use-by date, yes – 12 months. If you haven’t cashed that voucher within 12 months, the government will open an account for you so the money’s not lost

H: Right, ok and then how would I become the person who is then running, who is in charge of that account if the government’s opened it for me?

M: Because the government will write to you and say we’ve noticed you have not opened an account for your child so we’ve done it, you know, after a year we’ve done it

H: Yes

M: This is the account we’ve chosen for you, and it’s random, random selection

H: Oh ok

M: And here are the details

H: Right

M: You’ll receive that and then it’s down to you to either change it or go yes I’m quite happy about that, with all the confusion and hassle in the first 12 months I forgot about that, thank you for someone taking it out of my hands

H: Yes

M: But really and truly when you get that voucher put it in an investment straight away, because -

H: Yes

M: The sooner you put the money in, the more money eventually that you’ll get for your child at the end of it

H: Yes and there’s no – so after a year then the government will open the account

M: Yes

H: And then it doesn’t matter you know if it’s – if the paperwork has got lost or I’m busy doing other things it doesn’t matter how long after that I get round to organising it, it’ll just sit in that account?

M: After a year it will sit in that account

H: Right, ok great. Sue wants to know “do you have to be living in England to claim?” I think I know the answer to that

M: Yes you do

H: Yes

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M: A child living in the UK and eligible for receiving child benefits, there’s more information available on the site, perhaps there’s situations that are different, but all the information is on the site, but yes as a rule of thumb eligible – live in the UK

H: So basically we’ve got a year to choose what sort of account we want to open otherwise the government will do it for us, good I’m clear about that. And something else we need to move on to now is what is the child going to do with the money when they have access to it, and again we asked our people in the high street what their thoughts were. Shall we have a look at what they had to say?

M: Definitely

Video footage

“Car lesson, driving lessons or university because probably by then you have to pay for it a lot, so yes”

“Hopefully they might spend it on university fees and that means that we don’t have to cough up so much!”

“Education in the future seems to be a good idea”

“She can use this money on whatever she wants to”

“I think it’s going to be university fees, most of it, but actually I can’t say, I mean it’s really hard to decide you know 18 years before that so – you never know, but I think that it’s not going – definitely not going for all those everyday kind of stuff or buying a house or anything like that”

“Well I’m hoping that it will go towards university but who knows? Who knows, I’ll let him choose for himself but I’ll certainly push him in that direction”

H: Very sensible parents aren’t they? I wonder if the children are going to be as sensible when they get to 18 or if they’re just going to blow it on shoes and handbags

M: Be interesting to find out

H: Yes. I mean, you know, is this money to be spent on literally anything they want or are we being given any guidance about it?

M: No,

H: No?

M: No guidance at all, the same way we don’t prescribe to say you must open a certain account, this is for the children so you know this is for their future and to encourage saving, because I think it’s an art that’s dying out, it’s more spend and -

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H: Pay for it later

M: Pay for it later, this is to encourage, you know it would be great wouldn’t it to be able to say you can hand this over at 18 and they can deposit for a car or anything like that

H: House deposit, that’s a big issue for young people nowadays isn’t it?

M: Yes definitely but yes they can spend it on -

H: Travelling?

M: Yes, they can spend it on whatever they choose to spend it on. I’m sure a lot of parents will say no, you’re not going to waste it like that, but no for them to do whatever they want

H: But it is, you’re right it’s – at that age to be given, it’s really giving them an opportunity isn’t it, it’s not just about the cash, it’s an opportunity to do something that they may not have been able to do otherwise

M: Yes to give them that leg-up, you know just that help that they need. I mean my daughter’s taking her driving test today so it would have been handy to have been able to say here you are darling, let’s go buy you a car

H: Quite

M: Bank is mum now

H: What would you spend yours on if you were 18 again? It’s only a couple of years ago so I’m sure you can cast your mind back!

M: Oh thank you! Car more than likely, yes it’d be a car or a deposit for a house actually

H: Yes

M: If I could have the head that I know now, back then, great – see the future, plan

H: Yes absolutely. Leonard wants to know – “what’s the tax status on the £250 contribution?” That’s interesting

M: It’s tax-free. I mean it’s from the government, it’s to help your child but I don’t really understand what he’s saying about the tax element, but you’re not going to get taxed, you put that £250 in the account, it is a tax-free interest gain, it’s clear from tax

H: Maybe he’s concerned about when it matures that maybe -

M: All gains are tax-free and not subject to capital gains tax or anything like that

H: Right

M: And the full information is on the website because I was looking at that last night

H: Great, ok and Elaine wants to know “is there a minimum” – this is interesting – “is there a minimum amount of money you have to invest in a fund? Money’s a bit tight, haven’t got much to get started with.” Of course you don’t have to invest anything do you yourself?

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M: No you don’t have to invest anything, but I mean some providers, which is why it’s very important that you make the choice, some providers may say, you know £5, £10 a month, it’s like all the different savings accounts like you see over the weekend, it’s like minimum of £5 a month, all that, but the government do not set that amount, but as far as we’re concerned there is no minimum amount and you don’t even have to invest if you don’t want to. If you just want to put the £250 in and just let it grow then that’s entirely down to you

H: and just to reiterate something earlier, if we’ve gone beyond that year

M: Yes

H: The year that we have to choose the account and to open it, and the government has set up an account for us, we’ll be notified of that

M: Yes

H: And then we – do we have to fill a form or go online or ring somebody to become the person whose then in charge of the account, I can’t remember what you said.

M: As far as I’m aware and I’ve led to believe is that the forms will be sent to you because you’re the name as the responsible parent

H: Right

M: You’re the one that’s receiving the child benefit award so you’re down for that, all the letters for child benefit come to you, so it makes sense that all the letters regarding child trust fund come to you as well

H: Yes

M: So you’ll be the contact all the time

H: Ok great. And what percentage of people haven’t yet got around to opening their accounts and using their vouchers?

M: I’m not sure of the current figures, I think it’s something – running between 20 and 25% but I mean I can get back to you to confirm that but the uptake has been good, but we want everyone to realise that this you know – for their children

H: Yes, it’s free money

M: Free money

H: Absolutely and it’s sitting there with your name on it

M: Your child’s name, your child’s name

H: Your child’s name, yes of course, yes. And James on that same issue about who gets their hands on the money, when the fund matures does the parent have to give permission to release the money?

M: As far as I’m aware no because from 16 the child, your child will be encouraged to be responsible

H: Yes

M: So by the time they’re 18 you know they know this money is theirs

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H: Yes

M: And it’s totally – it’ll be transferred over to them at 18

H: I can – it’s going to be a really interesting time isn’t it for those children who are getting it

M: Yes it will

H: 16, it’s like a really big step and you know if you as a parent are interested in those sorts of things going through with your child different types of savings and so on and risk and what they’re going to use it for in a couple of years time

M: I think it’s brilliant, I – because it’s great to encourage people and to get people financially aware you know of the different bank accounts that are out there, the different savings accounts, you know the different options and to always save for the future, not because you’re 18, to keep on saving for rainy days or your old age

H: Yes, I’ll look forward to that. Now in a second we’re just going to get some final thoughts from the high street but I want to say thank you very much to you

M: Thank you

H: And of course if you want to know anything else or recap on any of the issues that we’ve covered today then you can go to the website which is childtrustfund.gov.uk, I’m sure there are very full answers to all of your questions there, so thank you very much for watching, thank you for coming in and explaining it all to us, and we’re just going to go back to the high street now and get some final thoughts from our mums and dads. Bye for now

Video footage

“I think it’s a very good idea, yes, I think it’s great because it means that when they’re older they’ll have some funds, don’t know how much but to start them off in life if they want to go to university, or whatever they want to be doing at that time”

“It’s quite a good idea, it’s brilliant, it gives them a start doesn’t it, gives the kids a start. I think it’s very good”

“It’s great, it’s good” [Why is it good?] “Why is it good – because it’s thinking forward”

“Yes I think it’s great, I mean there’s nothing you can actually lose about that so you only gain”

“It’s sort of a good thing because when he turns 18 then he’s got all this money that he can spend on education or whatever he wants to spend on, that’s a good idea”

“I think it’s a good idea, yes. I mean you don’t lose anything do you if you won’t gain something, and when she’s like 18 years or so she’ll get something” 

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