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Child Tax Exempt Savings Plan

Start saving now to give your child or grandchild a guaranteed tax-free cash sum when they reach adulthood

Child Tax Exempt Savings Plan

Frequently Asked Questions

Please see below answers to some of the most commonly asked questions about our long-term savings plan for children - the Child Tax Exempt Savings Plan. If you can't find what you're looking for here please let us know.

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About the Child Tax Exempt Savings Plan

What is the Child Tax Exempt Savings Plan?

The Child Tax Exempt Savings Plan is a long-term regular savings account designed to provide a tax-free lump sum for your child or grandchild at the end of your chosen term.

Who is eligible for a Child Tax Exempt Savings Plan?

Child Tax Exempt Savings Plans are available for anyone under the age of 16. There are also Tax Exempt Savings Plans available for adults allowing you to save tax-free for your future. 

How old does the child need to be to receive their cash lump sum?

The child must be at least 16 years of age to receive the tax-free proceeds of the plan. 

Do I need to get the child's parents' permission?

As part of the application process, we will ask you to confirm that the child's parents agree to you setting up the plan. We are required to send them a copy of the policy documentation, so we will also ask you to provide their details as part of the application process.

Who will the policy documents be sent to?

Policy documents for the Child Tax Exempt Savings Plan will always be sent to the child's parent/guardian.

If the person paying into the plan on behalf of the child is not the parent or guardian, they will receive a copy of the direct debit agreement to show they are paying the contributions.

What guarantees do you provide?

The Child Tax Exempt Savings Plan provides a guaranteed minimum tax-free cash amount payable at the end of your chosen term, which will not be less than the amount you have paid in. This is subject to all monthly contributions being paid for the full term of the plan.

Are there any charges?

As with any investment, there are costs in running the fund including the costs of buying and selling assets. We deduct charges before we declare bonuses meaning that there are no additional charges for you to pay. For more information about charges, see the Child Tax Exempt Savings Plan Key Features Document.

Can I open more than one Child Tax Exempt Savings Plan for my child?

It is possible to have more than one CTESP with Foresters or different providers, as long as the combined monthly contributions do not exceed the £25 limit.

Each person (including children) can save up to a maximum of £25 a month in a Friendly Society tax free regular savings plan, under current legislation.

Finding the right plan for you

What's the difference between a Child Tax Exempt Savings Plan and a Child Trust Fund?

Child Trust Funds (CTFs) were a long term tax free savings accounts introduced by the Government. The CTF scheme came to an end on 1st January 2011, although existing CTFs remain in force and open to top ups. Junior ISAs were launched in November 2011.

Child Tax Exempt Savings Plans (CTESPS) are different to CTFs and Junior ISAs.  They are a form of long term savings plan that are unique to Friendly Societies, offering up to an additional £300 per year tax free savings allowance. CTESPs can be held alongside other child savings accounts.

How do I choose the right plan?

You should consider your ability to make payments throughout the term of any plan. You may also wish to think about your attitude to risk and the Product Performance when considering savings options.

I'm not sure if the Child Tax Exempt Savings Plan is right for me. What should I do?

If you're unsure as to the suitability of this product you should seek advice from a Financial Adviser. You may have to pay for this advice.

What if my child already has a Junior ISA or Child Trust Fund?

Child Tax Exempt Savings Plans can be held in addition to Junior ISAs, Child Trust Funds and other tax-free child savings accounts.

Payments into the plan

What is the minimum payment?

The minimum payment is £15 per month if you apply online, or £25 per month if you apply by post.

What is the maximum payment?

To benefit from tax exemption under current legislation, the maximum level of total contributions per child per month is £25.

Can I choose how much I pay?

If you apply for our Child Tax Exempt Savings Plan online you can choose a monthly contribution of between £15 and £25. If you apply by post the monthly premium is fixed at £25. We will collect your payments by Direct Debit from your bank.

How do I pay?

Payments are by Direct Debit - which is why we'll ask you to provide your bank details when you apply.

Can I pay a lump sum into the plan?

It is not possible to make a lump sum payment into the Foresters Child Tax Exempt Savings Plan.

What am I committing to?

Once you select the term, which can be from 10 to 25 years, you must make payments throughout the term to ensure the child benefits from the tax free pay-out.

Can other people - such as the child's parents pay in?

The plan is based on one agreement. Given the minimum payment amounts, it isn't possible for more than one person to be paying into the plan.

Can I stop and re-start the payments?

No, the Child Tax Exempt Savings Plan is designed to be a medium to long-term regular fixed commitment.

What happens if I stop paying?

If you stop making your payments, especially in the early years, the child is unlikely to receive as much as you have paid in. If you stop paying in the first year, the plan will lapse with no value.

What happens if I, or the child, die?

If the child dies, a benefit equating to a refund of contributions paid to date will be payable to the child's estate. If you die while paying contributions on behalf of a child, someone else may continue to pay the contributions.

Returns on the plan

How much could my child/grandchild expect to receive?

The amount received is made up of a guaranteed minimum amount (equal to the amount you have paid into the plan over the full term) plus any bonuses which have been added and a potential final bonus. The addition of bonuses is not guaranteed.  

Use our savings calculator to see how your child or grandchild's savings could 

You can request an information pack including a personal illustration.

Who will the money be paid to?

The maturity amount will always be paid to the child, not the person paying in to the plan.

Therefore the child will require a bank account set up in their name prior to the Child Tax Exempt Savings Plan coming to maturity.

Are there any restrictions on what the money can be spent on?

There are no restrictions on what the money from a Child Tax Exempt Savings Plan can be spent on.  Although as you can select an exact date for your child to receive the proceeds of this plan, the tax-free cash lump sum could help towards university costs, a first car or a deposit on a property.

Where is the money invested?

Any money paid into the Child Tax Exempt Savings Plan is invested in Foresters Friendly Society's with profits Order Insurance Fund. Here, we manage your money, alongside other investors' money. We spread all the money paid into the fund across a number of different types of assets that may include stocks & shares and cash. If the return from any one particular asset type is poor, the fund may be protected from the full impact of this fall as other assets forming part of the overall investment may perform better.

What interest does the plan pay?

The Child Tax Exempt Savings Plan does not pay interest. Instead, the with profits Order Insurance Fund provides your savings with the potential for growth, by way of bonuses.  What a child receives depends on the performance of our with profits Order Insurance Fund. The investment performance cannot be guaranteed.

How do bonuses work?

At the end of each year, we aim to declare an annual bonus, based on how the fund performs and the costs incurred. In addition, when the Child Tax Exempt Savings Plan matures, Foresters may add a final bonus based on the overall investment growth achieved and expenses incurred.

This is different from a Bank or Building Society account where interest is added, because any growth on the investment with Foresters depends on the performance of the underlying fund. 

Although in some investment conditions the growth in the Child Tax Exempt Savings Plan might not be as much as that on an interest-paying account, investing in this way means there is the potential for growth over and above the level which might be achieved on interest-paying accounts.

The addition of bonuses is not guaranteed and therefore it is possible that your Child Tax Exempt Savings Plan might not receive any annual and/or final bonus. 

What happens when my child's plan reaches maturity?

A maturity information pack will be sent to the child's parent/guardian the month before the Child Tax Exempt Savings Plan is due to mature. This will advise how much the cash lump sum payment will be and will detail the information we will require so we can transfer the money to the child.

Tax and the plan

Would a child really be paying tax on an account?

It's worth bearing in mind when looking at savings options that a young adult may be earning and paying tax when the plan matures. Our children's savings plans ensure that, even beyond 16, the child is exempt from tax on the lump sum pay-out.

Under current legislation, each person (including children) can save up to £25 tax-free a month in a Friendly Society Tax Exempt Savings Plan. Any premiums above these limits can be invested in the Society's other savings plans.

There's a common myth that children don't pay tax - that's simply not true. In fact, children are taxed in the same way as adults. Each child can, in the 2016/2017 tax year, benefit from up to £11,000 tax-free income and, depending on total taxable income, up to £1,000 in tax-free savings income.

Most children don't use up their allowance, so their savings interest is tax-free. But there's also the proviso that any interest earned on money specifically given to them by a parent is only tax-free up to £100 interest a year, per parent or step-parent, beyond which all interest is taxed at the parent's rate.  Please be aware that tax rules might change and depend on individual circumstances.

What is the difference between tax free and tax exempt?

When referring to Child Tax Exempt Savings Plans, tax free and tax exempt have the same definition.

About Foresters Friendly Society

Who is Foresters Friendly Society?

Foresters Friendly Society is a mutual society, founded in 1834 by ordinary people with a common purpose - to support each other through financial and other difficulties.

We've been looking after our members, and their finances, for over 180 years, offering care and protection through relevant affordable financial products. 

Since 1834 our aim has been to be open, approachable, honest and fair, treating all our members as individuals.

We always put the interests of our members first.

How safe is my child's money?

You'll be pleased to hear that our funds have grown steadily over the years and our financial position remains strong. (Source: Reports & Accounts 2015). However, note that past performance is not a guide to the future.

However, if in the unlikely event that Foresters Friendly Society were to be declared insolvent, you would be able to make a claim under the Financial Services Compensation Scheme.

About Friendly Societies

What is a Friendly Society?

Friendly Societies have been around for hundreds of years. They were founded on the idea of mutuality - that if a group of people contributed to a mutual fund, an individual within the group could benefit in a time of need. The principles still apply - friendly societies are owned by, and operate in the interests of, their members. Unlike public limited companies, they use revenues to the benefit of their members rather than distributing profits to their shareholders.

How do Mutuals perform, compared to PLCs?

With no shareholders to answer to, mutual societies can ensure their profits are only used for their members’ benefits by sharing this amongst members, or re-investing to provide potentially better returns, better value or higher levels of service.

Over the last 10 years, the average mutual with-profits policy produced 29% more than an equivalent from a PLC insurer – that’s around £11,400 more after 25 years for a £50 per month policy.

(Source: Association of Financial Mutuals:  AFM Key facts about mutual insurers and friendly societies November 2014)

What is a Mutual?

UK financial organisations are either authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) and can be regulated by one or both regulators, and are either mutuals or public limited companies (PLCs). Unlike a PLC, a mutual organisation has no external shareholders to pay in the form of dividends and does not seek to make large profits or capital growth.

Mutual organisations are owned and run for the benefit of their members and their profits are usually re-invested for the benefit of members, although some may be used for internal finance to ensure the mutual is sustainable, safe and secure.

Today, UK mutuals account for over £116 billion in revenue every year and 1 in 3 people in the UK are a member of at least one mutual. (Source: The Mid-Term Mutuals Manifesto 2013 and the Mutual 2013 Yearbook)

Membership and Extras

I read somewhere about benefits - but I imagine I pay for those somewhere?

When you take out one of our products, you automatically become a member of Foresters. As a mutual, we don't have to answer to external shareholders. Instead, we use all our profits to benefit our members. All Foresters customers can take advantage of Foresters Extras, a range of benefits we offer at no additional cost.

Do I get any additional benefits as a Foresters customer?

All our customers benefit from Foresters Extras, a range of benefits we offer at no additional cost.

Help and support

Where can I get help?

For help and support, please contact Foresters Friendly Society.

Child Tax Exempt Savings Plan - Foresters Extras >> 

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