- A new taskforce has been formed to explore better ways of reuniting young people with unclaimed Child Trust Funds (Government steps up drive to reconnect young people with £1.6 billion in unclaimed savings – GOV.UK)
- More than 750,000 young people have unclaimed Child Trust Funds worth £2,200 on average
- The total unclaimed savings and investments are worth more than £1.6 billion
Sarah Coles, head of personal finance at AJ Bell, comments:
“Child Trust Funds (CTFs) were meant to build a nation of investors, with the initial payment forming a strong foundation for a lifetime of investing. The dismantling of the scheme, and the failure to keep track of account holders, means for hundreds of thousands of these young people, those plans have fallen by the wayside.
“More than 750,000 Child Trust Funds are lying neglected and forgotten. It’s easy to see why. Parents were sent a voucher to enable them to open an account. If they didn’t get around to it, HMRC would do it for them. Of the 6.3 million accounts that were opened, 1.8 million were opened by HMRC, so there’s a decent chance the parents of these children never engaged with where the money ended up*.
“For those who did choose where to put the money, so much time has passed that there’s a real risk they moved house and didn’t update their details, and if the paperwork has gone astray, they may have forgotten these accounts entirely.
“It’s a crying shame, because the lost accounts are worth £2,200 on average. Not only could this provide a vital nest egg for these young people to start adult life, but it could also have provided an essential opportunity for their parents to teach them about investing over the years.
“Any steps to reunite young people with their money are welcome, but more should have been done along the way. The gap between the scheme closing and the first maturities meant less scrutiny of whether account holders were going missing. HMRC highlights that it did launch a letter-writing campaign for those who hit age 21. It also includes details when it sends out NI numbers for 16-year-olds – but clearly letters from the taxman aren’t cutting through.
“This is a huge, missed opportunity. AJ Bell data shows that a third of Junior ISA customers go on to make contributions into an ISA in the first two years of the account maturing, while less than a tenth withdrew more than half their pot within the first year. This demonstrates the power of children growing up knowing they are investors and feeling empowered and confident enough to stick with their investment habit in adulthood.
What should you do?
“CTFs were available to all children born between 1 September 2002 and 1 January 2011. If you think you or your child has a CTF, you can use the ‘Find a Child Trust Fund’ tool on the government website to see where your account is held. Then you can get in touch with the provider and check how to get your hands on your fund. Some people will need the cash for emergencies immediately, but if you have any flexibility, it’s worth considering keeping at least some of it invested. This is a brilliant opportunity for you to get to grips with investments as you embark on adult life.
“This isn’t just something to do after the child turns 18, because at this stage you can still benefit from switching into a Junior ISA. They’re both locked away to the age of 18 and will then belong to the child, but Stocks and Shares CTFs tend to have higher charges and less choice than their equivalent Junior ISAs, while Cash CTFs often pay less interest. It means parents should waste no time in tracking the accounts down and deciding whether to move the money into a Junior ISA. It’s also worth introducing the accounts to your offspring at the same time, so they have an opportunity to learn about their investments as they grow.”
*Source: The Share Foundation – General CTF Recovery campaign
