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Thousands of young adults have been urged to check if they are sitting on a pot of unclaimed cash by HM Revenue and Customes (HMRC).
The tax collection department says that around 671,000 young adults have yet to claim their child trust funds, worth £2,200 on average.
These funds are long-term, tax-free savings set up for every child born between 1 September 2002 and 2 January 2011. The government deposited £250 in each, with those in low-income families or in local authority care receiving an additional £250.
Young people can take control of this account at 16 and withdraw funds when they turn 18. With interest, most grow to be worth much more than when they were set up.
Angela MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive, said: “Thousands of Child Trust Fund accounts are sitting unclaimed – we want to reunite young people with their money and we’re making the process as simple as possible.”
A child’s parent or guardian can also pay up to £9,000 a year into the account. Many still do this, but new accounts can’t be set up. Child trust funds were introduced by Labour under Tony Blair in 2005, and scrapped by the Conservatives in 2011.
They were replaced Junior Individual Savings Accounts (ISAs) which are long-term, tax-free savings accounts for children. These accounts work similarly, except the government does not give any money when they are set up.
The HMRC has issued the new advice to Gen Z adults who may have a child trust fund, as it’s possible they or their guardians have lost track of it, or forgotten it was set up.
However, the department also advises against using third-party agents who offer to find child trust funds at a price. In extreme cases, they have been known to charge £350 or even 25 per cent of the value of the account for this.
Instead, they advise young people either search ‘find your Child Trust Fund’ on GOV.UK or use the free, approved tool from The Share Foundation which requires just a few details.
Once the funds have been accessed, there several options for what to do with it. Charlene Young, a pensions and savings expert at AJ Bell, said: “Once you’ve tracked down the money you can choose what to do with it. Your options are to transfer it to an adult Isa or withdraw the money.
“Until then, your money will just sit in an account that no-one else has access to, possibly paying very high charges.”
“Anything you transfer to an adult Isa at maturity will not count towards your annual Isa allowance, which is £20,000 for over-18s.”
