Maturing dormant Child Trust Fund accounts

Information for Child Trust Fund (CTF) providers on the treatment of dormant accounts at maturity, including legislative changes and how to apply for a modification by consent if a client can’t be contacted.


CTFs preceded Junior Individual Savings Accounts (Junior ISAs), created under the Child Trust Funds Act 2004 and the Child Trust Funds Regulations 2004 ('the 2004 Regulations'). All UK children born between 1 September 2002 and 2 January 2011 were entitled to one.

CTFs differ from Junior ISAs, notably each eligible child was entitled to a monetary contribution from the Inland Revenue paid into the CTF account. If the child’s parent or guardian did not open a CTF account for them, the Inland Revenue would do so.

The oldest CTF accounts started maturing from September 2020, as account holders turn 18. However, a significant proportion of CTF accounts have been dormant for many years, with firms unable to establish communication with the client.

Legislative changes

The Child Trust Funds (Amendment) Regulations 2020 ('the 2020 Regulations') came into force on 6 April 2020. They amended the 2004 Regulations to, among other things, make provision for the treatment of dormant CTF accounts as they mature to ensure the investments can retain their tax advantaged status.

Where the CTF provider has received no instructions from the account holder about what they wish to do with the proceeds of their maturing CTF, the CTF provider is required to transfer the investments held within the CTF to a 'protected account' on the 18th birthday of the account holder.

The protected account may take the form of a 'matured CTF account' or it may be an ISA. In either case the investments should be treated as if they had remained in the CTF account. Once the account holder establishes contact with the CTF provider (or ISA provider) they will be able to give instructions and either encash or transfer the investments retained in the protected account.

Protected accounts – MiFID position

Our PERG 13.5A guidance about CTFs is relevant to protected accounts. Generally, we would not expect a firm administering assets held in a protected account pending instructions from a non-contactable client to be carrying on investment services or activities for the purposes of MiFID requirements.

COBS 8.1 requirements on client agreements

CTF providers have raised concerns with us about the requirements concerning new client agreements in COBS 8.1. Briefly and as further detailed in COBS 8.1.2R and 8.1.3R, a firm is required to enter into a written basic agreement with a new client and, in good time before a client is bound by any agreement relating to designated investment business or before the provision of those services, to provide the client with the terms of the agreement and information about the firm and its services.

These rules would normally apply where the client’s CTF or protected account is moved to a new provider under a bulk transfer, or where the investments of a maturing CTF are moved into a new product (such as the protected account ISA), as required under HMRC legislation where the CTF provider has not received instructions from the client. CTF providers have noted that in either scenario it would be very difficult for a firm to comply with these requirements for dormant CTF accounts where the client is non-contactable. A typical example is where the only client contact information is a postal address from which the firm’s correspondence has been returned marked 'addressee gone away'.

In response, we have made available a modification to the application of COBS 8.1.2R and 8.1.3R for firms affected by this problem. This modification by consent means the requirements in COBS 8.1.2R and 8.1.3R only apply once the firm is able to contact the client. This should ensure that the firm is able to provide (or continue to provide) services for a non-contactable client’s CTF investments for what could be a long period during which the firm is unable to satisfy the client agreement requirements in COBS 8.1.

How to benefit from the modification

To take advantage of the modification by consent, you need to email [email protected]. The modification will not apply to you unless you do so. We will then write to you to confirm that the modification has been granted. We will publish each modification direction we grant on our website.

Other relevant obligations

We remind firms of their ongoing obligations to the account holder of dormant CTF accounts, in particular their duties under Principle 6 (treating customers fairly) and the client’s best interests rule in COBS 2.1.1R. Firms may wish to consider, in particular, the impact of ongoing fees and charges on the value left for the account holder to claim when they eventually make contact.

We also remind firms of our guidance consultation on the fair treatment of vulnerable customers (GC 20/3).

Industry’s role in assisting dormant CTF account holders

We expect firms to undertake reasonable efforts to establish contact with the holders of dormant CTF accounts and to help them locate where their CTF savings are held. As part of this, firms may wish to make consumers aware that HMRC offers a service for account holders to trace their CTF.