HUNDREDS of thousands of young adults have not touched their child-trust funds (CTFs) prompting concerns that accounts have been forgotten about or lost.
There is an estimated £554million being held in these savings accounts, which started to be accessible in September last year, the Times reports.
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The average CTF is worth £1,500, but any children whose parents contributed extra may have significantly more available now.
Child Trust Funds are a type of savings account that used to be available to save for younger children.
The government automatically opened accounts for any children born between September 1, 2002, and January 2, 2011.
All of these children automatically received a £250 voucher, although lower income families would have got £500. Children born between 2002 and 2010 would have received an additional £250 when they turned seven.
When accounts were opened, parents could decide whether the cash would be invested in stocks and shares or saved in cash.
Because Child Trust Funds don’t let you access the cash until you turn 18, the first tranche of teenager were allowed to use their accounts from September 2 last year.
How to trace a missing Child Trust Fund
IF you’ve just turned 18 or your child has, the likelihood is that there’s a Child Trust Fund waiting to be claimed.
If you’ve lost the paperwork or aren’t sure, don’t panic, you can trace your account through the HMRC service.
Fill in the form online to ask HM Revenue and Customs (HMRC) where the account was originally opened.
You’ll 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 need either:
If you’re looking for your own trust fund, you’ll need your National Insurance number.
HMRC will send you details of the CTF provider by post within three weeks of receiving your request.
HMRC will contact you for more information if you’ve adopted the child or a court has given you parental responsibility for them.
But the Investing and Saving Alliance (Tisa) told the Times that about 525,000 accounts have matured between September 1, 2020 and May 31 this year with 305,000 still unclaimed.
Because the government automatically opened the accounts on behalf of children whose parents didn’t respond, the body is worried that families have misplaced account details or moved house.
In January 2020, the government said that trust fund companies must send letters to the account holders before a child turns 18, but if people have moved house it is unlikely they will get the letters.
If the company doesn’t get a response then it moves the savings into an account called a mature CTF.
Martin Shaw, chief executive of the Association of Financial Mutuals told the Times: “Letters are sent in the run-up to maturity, but clearly some are lost or thrown away.
“In many respects the message is quite simple: in 99.9 per cent of cases, if you’ve just turned 18 and haven’t yet cashed in your child trust fund, there is a bank or financial institution waiting for you to tell them what you’d like to do.”
Even once you’ve tracked down your CTF, accessing the cash could be difficult.
The Times reports that users are being asked for documents such as utility bills or council tax statements, which many 18 year olds will not have.
Nigel Banfield, policy manager at Tisa, said: “Children turning 18 have very little financial footprint, they don’t have bank statements, utility statements or the other things that banks would usually require to open an account.”
What you can do with a Child Trust Fund
AJ Bell explains all the options 18-year olds have for their Child Trust Fund savings:
What can you do with your Child Trust Fund?
1. Cash it in: Ask your CTF provider to hand over the money and get it paid into your current account. If you do this you’ll lose the tax perks of the CTF, but for most people their personal savings allowance and capital gains tax allowance will be enough to protect any gains from tax in the short-term.
2. Transfer it to an ISA: You can transfer it to an ISA, either cash, stocks and shares, innovative finance or lifetime. Any transfers won’t count towards the annual ISA subscription, so that means whatever sum you transfer you’ll still be able to put up to an additional £20,000 into your ISAs in total in the current tax year. Any transfers to a Lifetime ISA will count towards the £4,000 annual limit though.
3. Do nothing: If you do nothing with the money your CTF provider will either transfer it to an ISA, if they offer one, or they’ll transfer it into a ‘protected account’, where it still won’t incur income or capital gains tax and it will sit until the account holder does something with it.
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