Almost 430,000 18-21-year-olds with an unclaimed Child Trust Fund, worth an average of £2,000, are being urged by HMRC to claim their cash as part of UK Savings Week.
Child Trust Funds are long-term, tax-free savings accounts and were set up for every child born between September 1, 2002, and January 2, 2011, with the Government contributing an initial deposit of at least £250. Funds can be withdrawn once the account matures when the child turns 18.
Commenting, Myron Jobson, senior personal finance analyst at interactive investor, said: “Many young adults might not be aware that there is a cash pot in their name waiting to be claimed.
“With the typical CTF valued at £2,000, this cohort could be sleeping on a decent amount of money that could boost their financial resilience amid the cost of living crisis.”
In many cases, Mr Jobson noted that CTFs have been “forgotten along the way” as Junior ISAs took centre stage.
However, he noted: “The value of CTF could be eroded the longer they are left untouched because of charges levied on the account.
“The National Audit Office estimates that CTF providers could be earning collectively up to £100million per year through charges on accounts – so it pays to act quickly.”
There are currently 5.3 million open Child Trust Fund accounts. Young people aged 16 or over can take control of their own Child Trust Fund, although the funds can only be withdrawn once they turn 18.
More than 500,000 matured Child Trust Fund accounts have been claimed or transferred into an ISA since the oldest children in the scheme turned 18 in September 2020.
Mr Jobson said: “If you know the provider where the Child Trust Fund is held, the first port of call should be to contact them directly. If you don’t, you can ask HMRC. They can tell you where the account was originally opened.”
People can locate their Child Trust Fund accounts online by using the ‘Find my CTF’ page on GOV.UK.
Sharon Davies, CEO of Young Enterprise, said: “We would encourage all young people to investigate if they have money which is unclaimed in a Child Trust Fund and to use it wisely.
“A disproportionate amount of the money is unclaimed by young people from disadvantaged backgrounds who are the very people who would benefit most from these funds. The investment could be placed into an adult ISA or put towards driving lessons, education or starting a business.
“The money in a Child Trust Fund has the potential to be life-changing and the lack of knowledge about them shows the importance of financial education and financial planning from a young age.”
Families can continue to pay up to £9,000 a year tax-free into a CTF until the account matures. The money stays in the account until the child withdraws or reinvests it into another account.
Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive, said: “Many 18 to 21-year-olds are starting out in first jobs or apprenticeships, starting university or moving into their first home and their Child Trust Fund is a pot of money with their name on.
“I would encourage young people to use the online tool to track it down or, for parents of teenagers, to speak to them to ensure they’re aware of their Child Trust Fund. It could make a real difference to their future plans.”
Mr Jobson added: “For the youngest holders, there are still six years before their Child Trust Fund reaches maturity. If you hold a Child Trust Fund for your child, it is worth considering transferring to a Junior ISA. It is a no-brainer in most instances as Junior ISAs tend to have better rates on cash savings, more investment options and lower charges.”
