TENS of thousands of families are missing out on more than £1,000 in free cash locked away in child trust funds.
Child trust funds (CTFs) were given to every child born between September 1, 2002, and January 2, 2011.
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The cash is tied up until the child turns 18 and the first cohort gained access in September 2020.
But families of 80,000 disabled children have been left unable to access £210million due to complicated rules, according to a new report by Renaissance Legal, as first reported by the BBC.
In April 2021, the average value of all CTFs was £1,911, whereas CTFs for children in care were worth £1,101 on average.
To access the money, parents of disabled kids have to go to court to get permission to make withdrawals on their child’s behalf – a lengthy and costly process.
Only 15 accounts were able to be accessed this way in 2021, according to Ministry of Justice figures reported by the BBC.
One of them was Michele Creed, mum of 19-year-old Alana with learning difficulties, who’s had to spend £750 to get the cash.
Michele said was so complicated she had to go through the court process twice – costing £371 in fees each time – to make sure both she and her husband could access her daughter’s savings.
Overall, the process took a year.
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Teddy Nyahasha, chief executive of OneFamily, the UK’s biggest child trust fund (CTF) provider, told The Sun: “It’s deeply unfair that we should have to treat our account holders who have mental incapacity any differently to any other 18-year-old.
“The current process that their families need to undertake is clunky and not at all user-friendly. It involves making an application to the Court of Protection (CoP) which is daunting, time-consuming and potentially expensive.
“As a result, many millions of pounds of savings belonging to vulnerable young adults are being withheld during a cost-of-living crisis.”
The Sun contacted the Ministry of Justice for comment.
What is a Child Trust Fund and does my child have one?
Kids born between 2002 and 2011 also had the opportunity to set up a child trust fund themselves.
HMRC sent the parents or guardians of qualifying children a starting payment voucher of £250 (or £500 if you were on a low income).
This is the same amount put into accounts for kids who have disabilities.
If you didn’t set one up for your child within a year, HMRC would do it automatically.
Anyone can add to the account thereafter, and you can put up to £9,000 a year into it.
The year starts on the child’s birthday and ends the day before their next birthday.
Your child will have full control over the account once they turn 18.
At that point, no more money can be added either.
Until your child withdraws or transfers the money, it stays in an account that no one else has access to.
CTFS were replaced by Junior ISAs in November 2011, so you can’t get one now.
How do I find my account?
If you are one of the tens of thousands of young adults who haven’t claimed their account, the government has an online tracing service where you can find out if you have one and which provider it’s with.
To find out more, you’ll need a government gateway login and National Insurance number.
If you are a parent looking to find out about your child’s fund you can either access it online, or you’ll need to send a letter to HMRC with the following details:
- Full name and address
- Child’s full name and address
- Child’s date of birth
- Child’s National Insurance number or Unique Reference Number if known
What happens after I’ve claimed the money?
There are a few options to consider once you’ve taken the money out of a matured trust fund.
Usually people put it straight into a bank account, invest it or transfer it into an ISA.
You can ask your CTF provider to hand over the money and get it cashed into your account.
This way you’ll need to share the bank account details you wish to transfer the cash into with HMRC, and you won’t be able to do this until you’re 18.
But if you’d rather invest it, you can transfer it into an ISA (Individual Savings Account).
The interest rates on a cash ISA are typically lower than a standard savings account, but a Lifetime ISA may be better if you’re saving for your first home.
If you go for a Lifetime ISA, you’ll be able to add £4,000 a year to the account and the government will grant you a 25% bonus as long as you put it towards buying a first home.
You can also wait until retirement to access the cash.
And keep in mind you don’t pay tax on the interest you earn in these types of accounts.
