£400m languishes in forgotten but matured Child Trust Funds
The first Child Trust Funds (CTFs) started to mature in September 2020, potentially giving teenagers a windfall on their 18th birthdays.
The Government gave families £250 (£500 for low-income families) for children born between 1 September 2002 and 2 January 2011, which they can access when they turn 18.
A total of £2bn was paid into CTFs for 6.3 million children, with parents given the option of choosing to invest the money or save it in cash.
However, an eye-opening report of CTFs by the National Audit Office (NAO) revealed that there was a lack of awareness and little engagement from the outset, while it was also critical of the Government’s incomplete data around the initiative.
Forgotten Child Trust Funds
The NAO said CTFs “are at risk of becoming forgotten or lost track of by the account holder” as it revealed of the total £10.5bn value at April 2021 (most was invested in stocks and shares), £800m belonged to 18-year-olds who could claim their cash.
However, 145,000 18-year-olds hadn’t claimed their share of £394m, while 175,000 had either withdrawn or reinvested £376m.
The report stated: “As more young people with a CTF turn 18, an increasing number can access their accounts. However, latest estimates indicate that more than a quarter of CTFs have remained untouched for a year or more after their owners turned 18.”
Further, it is unclear how many children and young adults are either unaware of, or unable to locate, their CTF.
It cited a 2019 YouGov survey of parents of children aged 8 to 16 which revealed one in six parents were unaware of the CTF scheme. HMRC set up 1.7 million CTFs – 28% of all accounts – after parents did not do so within the required 12-month time period using vouchers sent to them by HMRC, “meaning the child’s family had little engagement with the scheme from the outset”.
It added that children from low-income families were more likely to have their CTFs set up by HMRC than children from wealthier families.
While the average CTF pot stands at £1,911, children from wealthier families were more likely to receive additional payments from family and friends, with statistics revealing that 11% of CTFs for children from low-income families received additional payments with an average payment of £202. This compared with additional payments made into 27% of CTFs from higher-income families with an average payment of £342.
Another point it makes is around fees. It estimated that CTF providers including banks and building societies could be earning collectively up to £100m per year through charges on accounts.
And, there are currently 55 providers, down from 74 in 2011, “meaning that some CTFs will have changed hands”, making it harder for people to track them down.
This isn’t helped by HMRC’s incomplete data on CTFs during 2012 to 2020.
Gareth Davies, the head of the NAO, said: “At a time of economic hardship for millions of people across the country it is important the Government does enough to make sure young people are aware of, and can access, their Child Trust Funds.
“HMRC should also seek to re-evaluate Child Trust Funds to understand the impact the scheme has had on savings for young people, including those from low-income families.”
The NAO added that HMRC is expected to publish data on unclaimed CTF accounts in June this year, presenting data up to April 2022.
How to track down your Child Trust Fund
You can go to Gov.uk and fill in a form to trace the money, although you will need a Government gateway ID, according to Laura Suter, head of personal finance at AJ Bell.
Myron Jobson, senior personal finance analyst at Interactive Investor, added that 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.”
Jobson added that for the youngest holders, they still have six years before their CTF matures.
“If you hold a CTF 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,” he said.