Teenagers could be in line for an average windfall of £2,000 after it was revealed that £400 million is lying unclaimed from child trust fund (CTF) pots.
Around 6.3million CTFs have been set up since their launch in 2002, according to HMRC, and the first batch of accounts started maturing last year.
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But new figures, reported in the Daily Mail, have revealed that £400 million of the savings have still not been claimed.
Around 200,000 CTFs have not been cashed-in, worth an average of £2,000.
In many cases, a teenager may not know they are entitled to the cash.
Roughly 4.5million CTFs were opened by parents or guardians, but 1.8million have been set up by HMRC when parents failed to do so, which means these kids could be in line for a hidden windfall.
The accounts can only be accessed once the child it was opened for reaches age 18, so some teenagers may not know there is a CTF with their name on it.
What is a child trust fund?
CTFs were a government initiative for children born between September 1, 2002 and January 2 2011.
Under the scheme, parents and guardians received a voucher to deposit into a CTF account on behalf of their child.
Vouchers were worth between £50 and £1,000 depending on when children were born, as well as whether parents were on a low income at the time.
These needed to be added to special CTF accounts provided by a variety of banks and investment companies, with parents choosing between a cash or stock and shares version.
ALTHOUGH parents can no longer open a child trust fund (CTF), they can continue to save into them or transfer the money to a Junior Isa.
Both have a limit of saving up to £9,000 a year until the child is 18.
Once the child turns 18, the Junior Isa automatically rolls over into a normal adult Isa, which has a higher limit of £20,000 at present.
It’s worth noting that children can take control of their child trust fund account from age 16, although they cannot make a withdrawal until they reach 18.
The best Junior Isa on the market, from NS&I, currently pays 3.25% – more than one percentage point better than the best cash CTF open to all, a Skipton Building Society fund paying 2%.
Working on a cash basis is simpler than tackling stocks and shares, but you’re unlikely to make as much money.
Given children have time on their hands to weather any bumps along the road, investing in stocks and shares could enable them to grow their money more in the long-term.
Justin Modray, financial analyst at CandidMoney.com said: “The default stakeholder accounts are relatively safe bets, but there will always be better options on the market.
“Look around, take advice, switch and watch your child’s money grow.”
Where parents failed to deposit vouchers, HMRC will have done this for them. It put cash into so-called stakeholder CTFs that are linked to the stock market.
CTFS were replaced by Junior ISAs in November 2011.
These are opened by parents and don’t receive government cash, although interest is earned tax-free.
New CTFs can no longer be opened but parents can continue to contribute to existing ones.
The current limit is up to £9,000 a year, the same as Junior ISAs, with no tax payable on the interest.
How do I check if I have a child trust fund?
Most people can fill in this online form via the Gov.uk website to check if they have a lost account.
You will need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you fill in the online form.
If you’re a parent looking for your child’s trust fund, you’ll either need your child’s Unique Reference Number – you’ll find this on your annual CTF statement – or their National Insurance number.
If you’re looking for your own trust fund, you’ll just need your National Insurance number.
This is normally sent automatically in the three months before a person’s 16th birthday, but you can track it down via Gov.uk if you’ve lost it.
Once the form is complete, HMRC will send you details of the CTF provider by post within three weeks.
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Under new rules, banks and building societies will be allowed to move money in a lost CTF into an Isa account if they haven’t heard from the parent or account holder before they turn 18.
Provider One Family has previously warned that two million 16-year-olds could have up to £4,500 FREE cash in lost child trust fund accounts.
We helped one mum track down her 13-year-old son’s £800 missing child trust fund.
Consumer Crew: How to fix your finances and get out of debt
