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Forgotten Child Trust Funds – is there £2,000 waiting for your child?

Unclaimed Child Trust Funds total £1.7 billion and there might be one with your child’s name on it. Here we look at where the money is and how you can find it.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

In a time when we’re all under huge financial pressure, any additional income could be crucial, particularly for young people.

The 2023 HL Savings & Resilience Barometer, released in July, found that on average those aged 20-24 don’t have any money left over at the end of the month. In fact, they’re spending more than they earn.

During the same period of penny pinching, these individuals could have hundreds or even thousands waiting in an account that they know nothing about.

This article is not personal advice. If you’re unsure what is right for you, please seek advice.

Forget me nots

Child Trust Funds were automatically set up for children born between 1 September 2002 and 1 January 2011.

Parents needed to make a choice about whether their voucher went into a cash account or investment Child Trust Fund (CTF). If parents ignored it or forgot, then HMRC would open an account for them.

Out of 6.3 million accounts opened in total, 1.7 million were opened by HMRC as stakeholder CTFs, an investment CTF.

What is the knock-on effect of HMRC opening these accounts on behalf of children? Well, according to figures released in July 2023, it means there could be over £1.7 billion in unclaimed CTFs.

Why are so many unclaimed?

Unfortunately, the most likely to be impacted are those who grew up in lower income families and whose parents weren’t financially engaged when they received the voucher. These are the people who, arguably, could most benefit from this.

The parents aren’t solely to blame. In May 2023, a Commons Committee heard that part of the problem came from ‘lost years’. The period when the scheme closed to new entrants in 2011 to when they started maturing in 2018/19.

HMRC says CTFs fell down the priority list, so they didn’t keep a close eye on providers. During this time, many providers had been unable to contact hundreds of thousands of parents and children – often because they had moved on.

It’s clear the government and providers need to do more to reunite people with these accounts.

Steps are already being taken, including sending tax ambassadors into schools to explain the scheme and sending information to eligible 16-year-olds alongside their National Insurance numbers.

With the scheme only ending for children in 2011, it means almost one million young people with forgotten accounts are likely to be the first of many put in this situation.

How to know if you have a CTF that hasn’t matured

With figures from HMRC in April 2022 showing the average value of a matured account sitting at £2,203, it’s worth doing what you can.

Here’s what those eligible can do to reunite themselves with their account:

  • Track it down through the Government Gateway website. By completing a form with your child’s details, it will then inform you of the provider holding your child’s CTF.
  • Check whether a CTF is still the right option for their money.

Once you’re reunited with the account, you could consider switching into a Junior ISA (JISA). You cannot have a CTF at the same time as a JISA, but since 2015 you've been able to transfer CTFs into JISAs.

Both have the same tax benefits, annual contribution limit and the money is still locked away until the age of 18, but the JISA has a few advantages.

If you’re keen to keep your money in cash, JISAs tend to offer more competitive rates.

If you’re in an investment CTF you may be paying over the odds in charges compared to a JISA, where an equivalent tracker can be almost a third of the price.

ISA and tax rules can change, and their benefits depend on individual circumstances. Investments can go up as well as down in value, so you may get back less than originally invested.

Find out more about the HL Junior ISA and explore opening or transferring a Child Trust Fund to one today.

Discover the HL Junior ISA

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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