3.This Act removes eligibility to Child Trust Funds for children born from January 2011 onwards.
4.The Child Trust Fund (CTF) was introduced in 2005. All children born on or after 1 September 2002 who are in a Child Benefit award or in local authority care, live in the UK and are not subject to immigration control, are currently entitled to a CTF. Between the introduction of the CTF and August 2010, the Government contributed £250 to the CTF account at birth, with an additional payment of £250 for children from lower income families. Children in the care of local authorities got a total of £500. Payments of the same amounts were again contributed to CTFs by the Government when the child attained the age of seven, and additional annual payments into CTFs have been made for disabled children who are entitled to Disability Living Allowance on or after 6 April 2009.
5.On 24 May 2010, the Government announced that it would pass legislation to end CTF payments, to help reduce the United Kingdom’s budget deficit. The Government announced that:
from August 2010 government payments at birth would be reduced and payments at age seven would stop, and
from January 2011, all payments would stop.
6.The reason for this two-phase approach is that some government payments to CTFs (the starting payments to all, and the additional payments to children in lower income families) can only be stopped through primary legislation, although secondary legislation can reduce the amount of such payments. However, other government payments to CTF accounts, such as that made when a child attains the age of seven or the disability payments, can be stopped altogether through secondary legislation.
7.Regulations made on 22 July 2010 implemented the first phase (see the Child Trust Funds (Amendment No 3) Regulations 2010 (SI 2010/1894)). They reduced all the starting payments from August 2010: the universal payment of £250 was reduced to £50, the additional payment to lower income families was reduced from £250 to £50 and the special payment to children in care was reduced from £500 to £100. They stopped age seven payments altogether from August 2010. They also stopped the extra payments made to disabled children’s CTF accounts with effect from April 2011.
8.This Act implements the second phase: stopping all government payments altogether. It does this by making provision for the removal of eligibility to a CTF from children born after 2 January 2011 and from certain children who would otherwise become eligible on or after that date. Children no longer eligible because of the Act’s provisions, once they come into effect, will not receive a CTF voucher from Her Majesty’s Revenue and Customs (HMRC) to start a CTF account. They will not be entitled to a CTF account and will not be eligible for any government payments.
