Your Child Trust Funds (CTFs) Questions Answered
Q. What is a CTF? A. A Child Trust Funds (CTF) is a savings and investment account for children born on or after the 1st September 2002.
Q. What types of CTF do Pilling offer? A. We offer two types of CTF, a non-Stakeholder CTF and a Stakeholder CTF.
Q. What is the difference between the two types of CTF? A. The non-Stakeholder CTF allows the registered person (the person with parental responsibility for the child) to make the investment decisions for the funds in the CTF whilst the Stakeholder CTF is run on a discretionary management basis by Pilling & Co. The qualifying investments in a non-Stakeholder CTF are more wide ranging and the charges are different from those of a Stakeholder CTF. (See Charges)
Q. Who can open a CTF? A. A CTF application can only be made by a person aged 16 or over. Therefore a child cannot apply to open their own CTF until at least 2018. The person with parental responsibility for the child can apply to open the child’s CTF, and could be: the child’s natural parent; a person who has legally adopted the child; or a person who has been granted legal authority by the Courts.
Q. How much will the government put in to the CTF? A. The amount of the government contribution will depend on the date of the child’s birthday and the individual child’s circumstances. All eligible children will receive an initial government contribution. For children who are in the care of a local authority on 6th April 2005, or who are taken into care after that date without a child benefit claim having been made, the initial contribution is referred to as a special contribution.
Q. How does the government contribute to the CTF? A.
The government will send the
person with parental responsibility for the child a voucher. This voucher should
then be sent to ourselves together with a completed application form. This
enables us to apply to HMRC for the money to open the CTF. We cannot accept
vouchers after their expiry date.
Q. Will the government put in an amount each year?
A. No, they contribute in the first year and may contribute further when the child reaches 7 years old.
Q. Can additional contributions be made? A. Yes, family, friends, local authorities and charities can contribute up to £1200 each year to the fund. The first subscription year starts on the day the CTF is opened and ends the day before the child’s next birthday. Immediately after the child’s birthday another £1200 can be contributed and so on in subsequent years between the child’s birthdays.
If contributions are made by family or friends they are deemed to be a gift to the child and cannot be repaid to the subscriber at a later date.
Q. How can these contributions be made? A.
Contributions can only be made by cheque or
direct debit. The minimum payment is £10. You can contribute a lump sum or
by monthly instalment.
Q. Can payments be back dated if all the £1200 is not used in an earlier year?A. No, unfortunately any subscription limit not used in any year is lost and cannot be used in future years.
Q. What investments are allowable in a non-Stakeholder CTF? A. You can buy Qualifying shares officially listed on any recognised stock exchange. Qualifying Investment Trusts, Unit Trusts, Open Ended Investment Companies and UCITS are allowed. You can also buy Gilts, PIBs, Bonds, Convertibles and Preference shares. Extra charges may apply to some overseas stocks so you should check with us before dealing.
Q. What's excluded from a CTF? A. Shares on the AIM and PLUS markets, Options, Futures, Nil-Paid Shares, Warrants and shares in unquoted companies are excluded.
Q. Who chooses the Investments? A. For a Stakeholder CTF all investments are made by Pilling & Co under a discretionary management arrangement. For a non-Stakeholder CTF you make the investment decisions and you can trade as often as you wish, although there may be some restrictions on certain investment choices, (i.e. high risk stocks may not be allowed).
We try to make sure the investments you choose for your CTFs are allowed. However, we do not accept any tax consequences and/or liabilities of any kind should we later find that, whatever the reason, you have chosen non-qualifying or unsuitable investments.
Our Investment Managers will be happy to provide more detailed personal analysis of your investment portfolio once you return our Client Agreement. Details are available on request.
Q. What are the tax benefits? A. Income and gains generated by CTF investments are exempt from income tax and capital gains tax. Also, income generated from additional subscriptions to the CTF does not count towards the subscribers income. Please note income cannot be withdrawn from the CTF.
Q. Do you deal "instantly?" A. Yes, for a non-Stakeholder CTF we will deal for you as soon as possible and you can often hold on the telephone while your deals are being done.
For a Stakeholder CTF we invest your cash on set days in our discretionary fund. (See Stakeholder Discretionary)
Q. Can I transfer shares held in my own name into a CTF? A. Sorry, this is not allowed. However, you may use shares to fund the CTF by carrying out a “Bed & CTF”. We sell the shares and then transfer up to £1200 of the proceeds into the CTF. In a non-Stakeholder CTF you may then buy the shares back into the CTF providing they are a qualifying investment. You may also buy different shares in the CTF from those you sell. We need your share certificate(s) and a signed CREST transfer form for each holding before proceeding. (see below and Charges).
Q. "Bed & CTF" - any special costs?  A. As 'arm's length' deals, you pay the market-maker’s 'turn' - i.e. the spread between the selling and buying prices goes to the market-maker. (We can often reduce this for you). You also pay 0.5% Government stamp duty on most purchases.
If the same holding is sold and then bought straight away in the non-Stakeholder CTF, you pay no commission on the sale and you just pay our normal rates on the purchase. If you do not buy the same stock in the CTF as the stock you are selling, then you pay a nominal charge of £10 per sale as well as the normal purchase commission. Any sales made in this way could have capital gains tax (CGT) implications.
Q. May I leave the CTF in cash?
A. Yes, cash is a qualifying investment for a CTF, but you may only do this in our non-Stakeholder CTF.
Q. Do you pay interest on cash?
A.
Yes, providing base rate is above 1%, we will credit the account every year, our
rate will be no lower than 1% below base rate at the time. Our current rate is
available on request.
Q. How is my money held?
A. Your cash is always held in accounts segregated from our own, and only in banks which are authorised and regulated by the FSA. Your money will be held by the approved bank(s) in a pooled account with other clients’ money and will not therefore be separately designated with your name. In the unlikely event of the failure of the approved bank resulting in an unreconcilable shortfall, clients may share in that shortfall in proportion to their share of the cash in the pool.
Q. How are dividends dealt with? A. Dividends are credited to the CTF plan. If there is any tax due from interest payments on gilts for example, we will reclaim this from the Inland Revenue and add this to the plan.
Q. Can income be paid out of the CTF? A. No, withdrawals of any kind can only be made by the child at aged 18 or over.
Q. Can I close the CTF? A. A CTF can only be closed for the following reasons:
on the death of the child,
on the child reaching their
18th birthday, or
on direct instruction from
HMRC (where the CTF is void).
A CTF
cannot be closed because the child has become non-resident in the UK.
Further subscriptions can be made to the CTF although the child may lose
entitlement to further government contributions.
Q. Can I transfer a CTF to Pilling? A. Yes, we make no charge to receive CTFs from other managers. However, a child must only have one CTF provider and their CTF must be either non-Stakeholder or Stakeholder, not a combination of both. (See application and transfer forms)
Q. Can I switch between non-Stakeholder and Stakeholder?
A. Yes, we can carry out an internal transfer, however the criteria for qualifying investments are different and your investments may have to be sold and reinvested into qualifying investments. (see application and transfer forms)
Q. Can I transfer my Pilling CTF to another provider? A. Yes, upon receipt of your new CTF providers signed transfer form we will transfer either a Stakeholder or non-Stakeholder CTF to a new manager of your choice. However, we will only transfer a CTF in the form of cash so any investments will have to be sold. (See Charges)
Q. How are my CTF investments registered? A. Through CREST, where available, in our nominee “St. Ann's Square Nominees Limited” (SASNL). The child is always the beneficial owner of the investments. They are never part of Pilling & Co’s assets nor, indeed, of the nominee company’s assets. There may be occasions when identical stocks are pooled together within Crest, at another custodians or at unit trust managers, as one block under the title of SASNL. These cannot then be attributable to any individual client and ownership will be evidenced by an electronic bookkeeping entry at Pilling & Co instead of a physical certificate. In these circumstances you are warned, that in the unlikely event of an unreconcilable shortfall after the failure of a custodian, clients may share in that shortfall in proportion to their original share of the assets in the pool.
Q. Are my investments secure? A. Yes. Pilling & Co accepts absolute responsibility for St Ann’s Square Nominees Limited. Your investments are not only protected under the Financial Services Compensation Scheme (FSCS), but, with the security of Pilling clients in mind, we also maintain additional professional financial risk insurance to cover the changing level of turnover in our business. If your investments must be held by a third party, we will use our best endeavours to make sure that only recognised and well-respected financial institutions are used. There may be further risk with non-UK based custodians because of different settlement, legal and regulatory requirements. In some cases dividend payments may be briefly held in a custodian’s overseas bank account before payment is made to Pilling & Co. However, we do not accept responsibility for such third party safe custody obligations.
Q. How do you deal with “Corporate Actions”?  A. For a non-Stakeholder CTF we write to inform the registered person of any action affecting the investments including conversion and subscription rights, takeovers and similar offers. We process any capital reorganisations, demergers etc. You may only take up rights issues and open offers in a CTF if you have cash in the plan, or can add new cash. If you do not have enough cash, then the funds must be raised inside the CTF. Rights and open offer entitlements can not be taken up outside the CTF. Where investments are pooled, entitlements are allocated on a 'pro rata' basis and are rounded down to the nearest whole unit.
You must give your clear instructions (preferably in writing) direct to the Pilling CTF Department by the requested date. We can accept no responsibility whatsoever for any resulting losses or liabilities.
Q. Can I borrow against my CTF? A. No. The child must always remain the beneficial owner of the CTF investments. They may not be used as security for a loan.
Q. Do I get a valuation and statement? A. Yes. At no extra cost, we send you an annual statement and valuation no more than 61 days before or after the child’s birthday.
Q. Can I have Company Reports and Accounts? A. Yes. We can arrange this but, to keep down costs, we suggest you get these from the Company Registrars direct.
Q. Do I have the same rights as an ordinary shareholder?
A. Yes. By negotiation, we can arrange for you to attend company meetings, to vote and to receive any other relevant information that is sent to share or unitholders direct.
Q. Can my CTF be "voided"? A. Yes. We regret that if your plan fails the provisions of the CTF Regulations, it may have to be cancelled ('voided') and we will tell you as soon as possible. However, this is a rare occurrence and we make every effort to ensure this does not happen.
Q. Does Pilling administer its own CTFs? A. Yes. All our CTFs are administered "in-house" by our own staff and we never delegate our CTF role to a third party.
Q. Can the investments be sold without my permission?
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