The National Audit Office (NAO) has warned hundreds of millions of pounds in Child Trust Funds aimed at helping young people to grow their finances in early adulthood have not yet been claimed. The spending watchdog raised concerns that accounts are at risk of becoming forgotten or lost track of by those holding them - but the money will remain safe until claimed.
It said estimates indicate more than one-quarter of Child Trust Funds have remained untouched for a year or more after their owners turned 18. Earlier this year, consumer champion Martin Lewis warned nearly one million young people could be sitting on a small fortune and not even know about it.
The founder of MoneySavingExpert.com explained how a Child Trust Fund is a tax-free savings account which was set up by the UK Government for every child born between September 1, 2002 and January 2, 2011. The UK Government has paid more than £2 billion into Child Trust Funds for 6.3 million children born during this period.
Most children received around £250 each, however those from low-income families or in local authority care received an additional £250.
Many Child Trust Funds were invested in stocks and shares, with the total market value of them standing at £10.5 billion at April 2021. Some of this belonged to young people aged 18 and over who had not unlocked their accounts.
The savings accounts mature when the child turns 18-years-old. Eligible teenagers, who are aged 18 or over and have yet to access their Child Trust Fund account, could have savings waiting for them worth an average of £1,911 according to the latest figures from HM Revenue and Customs (HMRC) - the higher end of the savings scale will be for those whose parents paid in additional money to boost the pot.
A couple of members of the Daily Record Money Saving Scotland Facebook group said their children received £850 and £950.
By April 2021, around 320,000 Child Trust Funds had matured in the seven months since the first Child Trust Fund account holders reached 18 in September 2020. Of these, 175,000 (55%) had been claimed by the account holders and the accounts closed, and 145,000 remained unclaimed.
Some £394 million was, by April 2021, yet to be claimed in matured Child Trust Funds belonging to young adults who had reached the age of 18, the NAO said, adding that it is unclear how many children and young adults are either unaware of, or unable to locate, their Child Trust Fund.
It also said HMRC intends to incorporate Child Trust Funds into a communications campaign in 2023.
The NAO estimated CTF providers - including banks and building societies - could be earning collectively up to £100 million per year through charges on accounts.
Gareth Davies, the head of the NAO said: “At a time of economic hardship for millions of people across the country, it is important the government does enough to make sure young people are aware of, and can access, their child trust funds.”
Public Accounts Committee chair Meg Hillier said people need to be proactively helped to be reunited with their funds, adding that, in a cost-of-living crisis, the money could be “a vital lifeline to young people, particularly those from low-income backgrounds”.
How to find your Child Trust Fund
If teenagers or their parents and guardians already know who their Child Trust Fund provider is, they can contact them directly. This might be a bank, building society or other savings provider, alternatively, they can visit GOV.UK here and complete an online form to find out where their Child Trust Fund is held.
If a parent or guardian was not able to set up an account for their child, HMRC opened a savings account on the child’s behalf.
Ask HMRC to find a Child Trust Fund
You can ask HMRC to find a Child Trust Fund if you’re:
- a parent or guardian of a child under 18
- 16 or over and looking for your own Trust Fund
You can either:
- use the online form to ask HMRC where a Child Trust Fund is
- request the details by post
To use the online form you’ll need:
- your National Insurance number
- a Government Gateway user ID and password - if you do not have a user ID, you can create one the first time you sign in
You can also do it by post, full details are on the dedicated pages on GOV.UK here.
What else you should know
Teenagers aged 16 or over can take control of their own Child Trust Fund if they wish, although the funds can only be withdrawn once they turn 18-years-old.
Where children have a Child Trust Fund, families can still pay in up to £9,000 a year tax-free. The account matures once the child turns 18 years old and no further money can be deposited.
They can either withdraw the funds from the matured Child Trust Fund account or reinvest it into another savings account.
Until the child withdraws or transfers the money, it stays in an account that no-one else has access to.
The Child Trust Fund scheme closed in January 2011 and was replaced with Junior Individual Savings Accounts (ISA) - find out more about this here.
To keep up to date with the latest cost of living news, join our Money Saving Scotland Facebook page here, follow us on Twitter @Record_Money, o r subscribe to our newsletter which goes out Monday to Friday - sign up here.
READ NEXT:
- People finding it difficult to pay bills this month urged to seek free advice from charity
DWP urged to consider providing dedicated financial help for people on a low income living alone
DWP writing to older people ‘soon’ to encourage them to check for Pension Credit worth £3,500
New energy social tariff proposals could see 12m households get £1,500 cash help each year
DWP urged to introduce new £25 weekly uplift for people on Universal Credit and legacy benefits
