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Do you have an unclaimed Child Trust Fund?

A recent investigation into Child Trust Funds by the National Audit Office (NAO) revealed that almost £400 million is languishing across hundreds of thousands of unclaimed accounts, with many children unaware that they could have several hundred pounds waiting for them.

Child Trust Funds were set up by the Labour government under Gordon Brown, creating savings accounts for more than 6 million children who were born between September 2002–January 2011. The government paid around £2 billion into these accounts in free cash vouchers of up to £250, or £500 for low-income families, so each account will have at least this amount in it.

With Child Trust Funds being locked until the child’s eighteenth birthday, and no new accounts being opened since the scheme was scrapped over a decade ago, many parents will have forgotten about them – or may have never been aware that their child has one.

However, the money is still out there and can still be claimed – if you were born between 1st September 2002 and 2nd January 2011, or the parent of a child who was born between these dates, this blog explains what you should know about these forgotten funds.

27% of Child Trust Funds remain unclaimed

All children born within the dates above should have a Child Trust Fund, regardless of family wealth or whether their parents or guardians set the account up for them. While parents were encouraged to contribute extra savings to the account for their child to withdraw when they turned 18 years old, many failed to set them up when they received the free voucher.

The government then had to set up around a third of Child Trust Funds on behalf of these children, meaning there are around 1.7 million accounts that children or their parents are unlikely to know about as they had no involvement with them.

Additionally, many Child Trust Fund providers have either closed down or merged with others, taking the number of providers from 74 down to 55, and increasing the likelihood of accounts moving to different providers and being harder to track.

Though HMRC has been writing to some children to remind them they might have a Child Trust Fund when sending out National Insurance numbers ahead of their sixteenth birthdays, the NAO believes the government isn’t doing enough to notify account holders or monitor account data.

In fact, the NAO found that despite the first eligible children reaching adulthood in 2020, almost half of matured Child Trust Funds were not claimed as of April 2021. This has dropped from 45%
to 27% according to the most recent estimates, but over a quarter of matured accounts are still unclaimed.

With the NAO estimating an average of £2,700 per unclaimed Child Trust Fund and the possibility of these savings eroding over time as the providers charge levies on the accounts, the sooner eligible children can withdraw their matured funds, the better.

How to trace a lost Child Trust Fund account

If you are an eligible child or the parent of an eligible child, and you know who the provider was who should be managing the account, you can contact the company directly to access the Child Trust Fund and transfer the funds if the account has matured.

If you don’t know who the provider was, you can contact HMRC to request this information through their Child Trust Fund tracing service. You’ll need a Government Gateway account to log in and submit the online form – alternatively, you can write to them by post, but it can take up to 3 weeks to receive a response this way.

You can do this whether you are the parent or guardian of an eligible child, or an eligible child yourself. If you are over 16 years old, you can request your own Child Trust Fund details, but you cannot access or withdraw the money in it until you are 18 years old.

In all cases, to request Child Trust Fund provider information from the government, you’ll need to provide the name, date of birth, National Insurance number, and address of the eligible child. They should respond with the details of the bank, building society, or investment company that provides the account, so you can contact the provider directly.

Get help with a Child Trust Fund

More information about Child Trust Funds, including how to locate them and add or withdraw money, is available on the government website. Once you’ve found the account and checked the funds in it, you’ll have a few options.

If the holder of the Child Trust Fund is under 16 years old, you can either leave the account as it is or add more money into it until they’re old enough to claim it. Alternatively, if the holder is between 16–18 years old, you may want to switch the account to a Junior ISA.

While you aren’t allowed to take the money out before the holder is 18 years old, the government does allow closing the account and transferring its contents to a Junior ISA instead, which can then be withdrawn once they reach the qualifying age. This is often preferable, as ISAs
tend to have lower charges and higher interest rates.

Once the holder is 18 years old or above, they are free to withdraw the money from their Child Trust Fund and do whatever they like with it. There’s no obligation to re-invest, but it would be wise to transfer at least some of the funds to a new savings account or adult ISA.

If you want to do something sensible with the savings from a Child Trust Fund, and are interested in financial planning services for yourself or your family, get in touch with our accountants in Barnsley.