Parents urged to take advantage of free financial support

H: Lis Speight, host
S: Sarah McCarthy-Fry, Exchequer Secretary to the Treasury
C: Clare Merrills from HM Revenue & Customs

H: Hello and welcome to the Parenting Show, I'm Lis Speight. Now as many as you know bringing up children can be expensive, which is why there are several family-friendly benefits and tax credits to help ease the costs. In today's program we're marking a landmark occasion in the Child Trust Fund scheme as a reason to look at all the financial benefits that are available to parents of young children. So you can be sure you're getting everything you're due.  To help us I'm delighted to be joined by the government minister responsible for the Child Trust Fund, Sarah McCarthy-Fry, who is a dec – exchequer secretary – I knew I'd get that wrong – to the treasury, and by the expert from HM Revenue & Customs Clare Merrills, welcome along both of you ladies, great to see you today. Now we are live so if you've got any questions at all about family benefits then do get them into us and we'll do our best to answer them for you. But before we tackle your questions, let's talk a little bit first about the Child Trust Fund and what exactly is it and why is September this year such a big day?

S: The Child Trust Fund was set up by this government because we want to get young people into the habit of saving, and we want all young people to have the opportunity to have a little nest egg when they get to 18, no matter what their background and no matter what their family circumstances are. So the government gives £250 when a child is born

H: That's quite a lot of money actually 

S: Quite a lot of money

H: Yes

S: And that started in September 2002, so any child that was born from September 2002 will have this £250 voucher to open the Child Trust Fund and the importance of today is that when the child reaches 7, and the children from 2002, their 7th birthday from the 1st September –

H: Right so the 7 year olds are coming up for it –

S: The first 7 year olds are coming up, they get an extra £250 on top to add to their little nest egg

H:  Fantastic. So £500 and hopefully by the time you're 18 that will have grown a little bit

S: Hopefully it will have grown a bit, but also we're encouraging parents and grandparents and relatives and friends to add to that to encourage a saving habit, so that they're saving a nest egg for the future for when they're 18

H: And what can the children spend it on?

S: When they get to the age of 18 they can spend it on whatever they like. But we're hoping that with the financial education that we have in schools now, that young people understand that they've saved up for things and that they'll be – they'll understand about saving and about spending, and that when they're 18 they will spend it responsibly. 

H: That's the plan

S: Yes

H: And how do you sort of actually get it? How do you get your voucher, how do you know where to put it? What do you do with it?

S: Well when you first apply for your child benefit when you have a baby, then you will be sent your £250 voucher.

H: Right

S: And there are 3 types of accounts that parents can open for their children with a Child Trust Fund – it can either be a cash savings account which is just like a building society account or a bank account. Or there's a stakeholder account which means that it's invested in stocks and shares and equities, but it's tapered off, so when the child gets to 13 it's then moved into a more cash-based scheme. Or there's another sort of scheme which is totally stocks and shares and equities right the way up until they're 18. Now when the child is 16, the child can then have some control over it because they can decide how their trust fund is invested. They don't actually get the money till 18 but it's also giving them some financial responsibility at 16.

H: It sound a bit scary, making a decision about where to put the money – I know when I got my voucher I sort of panicked a bit and it just sat on the mantelpiece for 6 months and I did nothing with it, and that's the worst thing you can do. It's better to make a decision isn't it because you can move the money can't you later on?

S: It's better to make a decision and there's lots of advice and guidelines and websites that can help you, and you can always move it around later on, but it's best to get that money invested as soon as you can

H: Exactly, and then you can always change your mind later

S: Absolutely

H: So don't panic, get it invested and at least it's making some money for you

S: That's right

H: Isn't it? And what about low-income families, they get a little bit more don't they?

S: They certainly do. Low income families get an additional £250 at birth, so that's £500 and on the 7th birthday there's an additional £250 again, so they will have £1000 to make sure that children from families where there isn't a great deal of money are getting that extra bit of help so they're on a level playing field with other children

H: Yes. Ok.  And tell us a little bit about who can put money into the Child Trust Fund then, through the years

S: Ah – parents, relatives, families – anyone can add into that up to a maximum of £1200 a year, and there's no tax penalties on that at all. And when they get to 18 if the child wishes they can roll it over into an ISA which is also tax-free, so they don't have to spend it at 18

H: Right

S: And if they've got into the savings and investment habit maybe they'll want to keep it in there

H: Ok, interesting stuff. We'll take some of your questions now actually because we've had quite a few coming in, we've got one from Jack Huddleston, he says "is there a limit to how much family members can add into the fund?"

S: Yes it's £1200 – is the tax-free annual amount, so that's £100 a month if people are saving regularly on a monthly basis

H: And that's per family member is it?

S: That's per child

H: Per child?

S: That's for the child's fund, so it's £1200 in that child's fund

H: Right. And do they get taxed on that money that they put in, or taxed on the interest – I think you sort of covered that, they don't

S: No, that £1200 – the money that the government puts in, plus up to a maximum of £1200 a year is tax-free

H: That's fantastic isn't it? So you should have a nice little nest egg there

S: That's right

H: If you can afford to put £10 in

S: That's right

H: Then you'll be laughing by the time you're 18. Ok well we've been talking to a father actually whose taken full advantage of the trust fund, he's got 4 children and let's have a little look at what he had to say about it

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"I'm in favour of the Child Trust Fund, I've set up 4 for my 4 daughters, 3 of them are within the government scheme so obviously they've had their first £250, and my second daughter will be getting the second £250 in about a week's time when she becomes 7. I've also set one up for my daughter who didn't qualify because I wouldn't want the difficult situation of explaining to her why she didn't get it in the end. We're investing £25 a month per child in the scheme, and obviously I like the fact that it's a tax-free environment because hopefully all of the return that will come in will accumulate and will be a decent amount when they get to 18. Well I should hope when they reach 18 I can encourage them to use the money in a positive manner. Perhaps investing in education or some other sort of mind developing activity such as travel or some other form of training. And as to what they actually do with it, ultimately the money becomes their investment and their choice. I hope they spend it wisely."

H: Ok well he sounds like he's a – making full advantage of that. Four girls – he's got his work cut out hasn't he? Now we are live of course so if you've got any questions at all about Child Trust Fund or indeed Child Tax Credits or the pregnancy grant or the Child Benefits then do get them into us because Clare is our expert here and she can tell you all about what you're entitled to. If you want to get your questions in, all you have to do is to type your name and your question in the box that's on the screen, press submit and it'll come through to us here in the studio and we'll try to get through as many as we can during the course of the show. So moving on to some of your questions that have been coming in, Tom has asked "how does the additional payment work?" I presume he means the £250 additional payment – does that just automatically go in or do you have to sort of tell the government that your child is seven?

S: No it's automatic. Once your Child Trust Fund has been opened at birth the additional payment that comes in at age 7 will be automatically paid in there

H: Oh that's fantastic isn't it?

S: Yes

C: And the extra £250 that Sarah mentioned earlier on for the lower income families, that will actually go in after the end of the financial year, once we've worked out what people are entitled to as far as tax credits are concerned

H: Oh I see

C: Because the lower income families, that's actually worked out on the tax credits claims. So if the income for this current year is under £16040 then they would qualify for the extra £250, and that would go in next year

H: Right. And you were saying to me earlier in the show that a lot of families are actually saving already for their children

C: Yes

H: So it's –

C: We actually did some research just recently of children – the children that are going to be qualified for these extra £250 – we've done that over the last few weeks.  We asked them, you know, are you saving already? And also what they wanted to be when they grow up? Now we got some very interesting answers I can tell you- but the research actually shows that 65% of these children that are going to be turning 7 are actually already saving either all or some of their pocket money every week. So we're already seeing that that habit is coming through. I know my children, both of them with Child Trust Funds are already – they have com petitions to see who can save the most – poor old mum has to pay for everything because they're having competitions to see whose got the most in the piggy months at the end of the month to take to the bank. But also I mean I said the research has showed what people want – what they want to be when they grow up – one little boy said he wants to be a dinosaur because they make lots of noise and they eat princesses. It was fabulous

H: He might be disappointed mightn't he? Yes. Not that many princesses around to eat actually are there?

C: No

H: Well let's move on to some more of your questions, and we've had one in from Daniel, and this is quite a good one actually – "I see that the voucher is valid for one year. What happens if it's not invested in that time?" Does it disappear? What happens to it?

S: Absolutely not, no child's going to dip out on any of this.  Parents have up to 12 months to invest it themselves. But if after the end of the year they haven't opened an account then the government will open an account for the child for them

H: Right

S: And the parents can pick it up at any time

H: Right ok. But it's best not to let the government do it if you can help it

S: Yes

H: Because you're missing out on a year of interest aren't you?

S: Missing out on a year of growth and also it's also about education and helping parents understand financial systems. So if parents get in there and do it for themselves then they're more likely to encourage the saving habit in children

H: Yes. And it's not as difficult as you think, it really isn't. We put it off and it wasn't that difficult, so get it done.  That's my advice. Oh we had a question there from Julia and it's just disappeared – ah it's come back again.  "Do we have to leave the fund in a certain bank account?" Julia asks

S: No absolutely not, you can move it around. There's lots of choice and you can swap around in between different types of accounts. Not just between different types of accounts, I said there were three types, the cash, the stakeholder and the equity accounts, but even different products within those groups, parents can move it around. You're not stuck with just one product

H: Ok well that's good. Ok Julia, I hope that's of help. Let's leave the Child Trust Fund there for the moment and move onto the other benefits that parents can get. We have the recently introduced Health in Pregnancy grant which is very new, the child benefit which we've all heard about and for those on limited income the tax credits. So let's start Clare with the Health in Pregnancy grant. What exactly is that and whose eligible if it's not obvious?

C: Yes. Well that's a £190 amount that you would get for this. This is for ladies that are reaching the 25th week of their pregnancy

H: Right

C: What happens is when they go to see their midwife at week 25 or after the midwife will discuss bits and pieces with them. And what they will do is fill out a form for them and then the lady will then take it away, fill it in, put details of bank account and all that type of thing on it, and then send it off, and then she will be sent £190

H: That's a lot of money isn't it?

C: It is a lot of money and it's a really good amount of money, when you're coming to those last stages and you're starting to get your bump aren't you, and you think oh gosh I need to be perhaps buying some maternity trousers or I need to –

H: Pram, cot – it goes on and on doesn't it?

C: Exactly, all of those things. You can spend it on whatever you like. I mean the idea is for you to concentrate your mind on health really

H: Right

C: You know, make sure you're eating a proper diet, all that sort of thing, but there is no limitations on what you can spend it on.  And that really you need to claim that because it's really important, but the midwife will give you the form

H: And so you need to claim that before your baby's born do you?

C: That's right, once the baby – because it is, as you said, the clue's in the title – Health in Pregnancy grant, so it's really important to do that

H: And that's very new is it, have those grants started going out already?

C: That's only come in this year

H: Right. And they've started going out already those grants have they?

C: From April. From April this year w started

H: That's worth having isn't it? On that note actually we've got a question in from Nicky, she syas "I'm in part time work and I've just found out that I'm pregnant" – congratulations.  "What am I entitled to if I give up work?" 

C: Well the first thing she's entitled to is the Health in Pregnancy grant, once she gets to week 25 make sure she goes to see her midwife and she gets that form so she can get what she's entitled to there

H: Right

C: What she will be entitled to afterwards depends really one what she chooses to do. She will get her child benefit, because when she goes into the hospital and we all get these little Bounty packs that they come round to the beds and give to you – there's a pack inside that for claiming your child benefit, so she needs to  - I know once you've got your new baby the last thing on your mind is filling in forms. But, do it because it's a good amount of money. If it's your first child you're going to get £20 a week, if it's a second child or more you're going to get an extra £13.20 a week so it's really, really worth claiming to get that. So that's the first thing, child benefit. She could be entitled to some sort of tax credit. Again it would depend on her circumstance, how many children she's got, whether she's working, that type of thing. She will be entitled to something there. What she needs to do there is to go onto the website www.direct.gov

H: Right

C: Go in there, everything there that you need to k now about the different benefits you can work out your entitlement, all the different things that you need to fill in, you can get forms that way- that is the place to go for all information

H: Right

C: About that type of thing. So she – that's what she needs to be considering. And of course she will get her Child Trust Fund once she's got her Child Benefit, because that's the way that you get your Child Trust Fund voucher, by claiming your Child Benefit. Once that's all sorted out, once it goes into payment we'll send you the Child Trust Fund voucher as well

H: Ok well Nicky there's lots to look forward to isn't there?

C: Yes

H: A lot of those sleepless nights and Child Benefit! But talk a little bit more about Child Benefit – is it sort of means tested, I mean does everyone get Child Benefit? We've all heard of it haven't we?

C: No everyone gets Child Benefits. But you have to claim it, it's not an automatic – you know it's not like you have your baby and then we automatically send it to you. It is one of those things that you do actually need to claim, but it is a very straightforward form. You can actually do it online as well. I mean I know when I had my son I did it online because they were chasing me for everything and you're so busy aren't you when you've got a new baby

H: That's it, if you get it set up and done at night, you often have time to sit down at the computer don't you, and do it?

C: Night?

H: You do go a bit bonkers after you've had your baby don't you, but if you can do it online it is much easier

C: It is yes so it really is – but it isn't means tested, it's everybody, it's a universal – and it's actually the benefit that has the greatest take-up of any of our benefits

H: And once you're up and running with it, that's it, it just goes through till they're 16 is it?

C: That's right, yes

H: And if the children stay in education –

C: If they stay in education then you're probably going to get it a bit further, but again that's one of those things you have to look at the sort of education they're moving into and that type of thing, so you will get a reminder once you're coming up to the child's 16th birthday just basically saying what's the situation, because we intend to stop it this date, but if they are in one of the qualifying further education then you'll be able to get it for a bit longer

H: And I know a lot of my friends put the Child Benefit straight into the Child Trust Fund –

C: Yes I've heard a lot of people do that

H: Which is a nice way of doing it. Which if you can afford it – I don't do that I have to say, but a lot of people do

C: No but if you can it is good – because I suppose it's one of those things that if you've not had it before you don't really miss it do you, and you can just pay it straight in, but as you say not everybody can afford to do that

H: But maybe a little bit of it, every bit helps doesn't it?

C: Yes, yes

H: Ok well moving on to families who are on a low income actually, and we have the Child Tax Credits, which I always thought were very confusing.  But when I came to fill in the form it wasn't that difficult at all! So Clare tell us a little bit about Child Tax Credits

C: The Child Tax Credit is – it's a ay of parents of children – obviously – are entitled to this top-up to their family income in effect. As you say it's quite a straightforward form to fill in, again if you go onto that website which I mentioned before which is the directgov website, there's loads and loads of information there about the different amounts that you can get. And the good thing about it is as well if you're working you can – and you put your children into childcare, you can actually get help with childcare costs as well, so it – I mean it is a – I couldn't sit here and go into minute details about it because the problem with it is it's really tailored to you and your circumstances

H: Right

C: How many children you've got, how many hours you're working, what sort of childcare you're putting them into. To qualify for the childcare benefit part of it it needs to be a registered childminder or nursery

H: Ok

C: It's not just granny's looking after the children

H: Right

C: Unless she's a registered childminder. So there's lots and lots of different intricacies with that, but you know if you've got a child or you're about to have a child, really take a look at that, look at everything that you're entitled to and make sure that you claim it because that's your money, and it really does help when you get to – and you get a bit more as well when it's a baby, there's a little bit extra in that first year that you get as well

H: Because you're awake all the time aren't you, so maybe that's why! I have to say that the people on the end of the phone line as well are really, really helpful at filling in forms and what have you. They are incredibly helpful and they're so nice –

C: Well that's what they do all day you see, they really do understand it

H: They don't treat you like you're an idiot at all, they really do  -

C: No, even though you've still got pregnancy brain!

H: Yes! They're very helpful. So there's plenty of help out there, you've just got to know where to look for it haven't you?

C: Yes

H: We'll be giving you the website addresses at the end of the show. But let's just move onto a question from Warwick Todd from London and he said "how does this affect other child benefits like tax credits?" So the extra £250 that will be going in when the child is 7, how does that affect other benefits? Does that affect them at all?

S: Doesn't affect them at all. The Child Trust Fund is totally separate and doesn't – will have no impact at all on any of the other benefits

H: Ok well that's good news there isn't it Warwick? Ok well that's about all we've got time for today actually. I hope we've answered some of your questions at home about the myriad of tax credits and benefits that there are available to you. I hope you found it useful, and thanks very much to our guests for coming in and you're just so brainy you know everything don't you about all these things!  Now if you want any further advice on the Child Trust Fund there is a dedicated website at www.childtrustfund.gov.uk and for more information on Child Benefit, the Health in Pregnancy Grant and Child Tax Credits you can visit the HM Revenue and Customs website where everything is explained really easily and the address is www.hmrc.gov.uk. Well Sarah and Clare thanks very much for your time, thanks for coming in

S: Thank you

H: And thank you at home for watching the Parenting Show and we'll see you next time. Bye bye