MILLIONS of teens are set for a windfall from next month when they’ll be able to access cash stashed in child trust funds for the first time – and they could be worth thousands.
Around 6.3million child trust funds (CTF) have been set-up since their launch in 2002, according to HMRC.
Roughly 4.5million of these have been opened by parents or guardians, but 1.8million have been set-up by HMRC where parents failed to do so, which means these kids could be in line for a hidden windfall.
And with the first 55,000 CTF holders turning 18 next month, which means they can access the cash for the first time, HMRC has revamped its free online tool to help you track down lost accounts.
Economic secretary to the Treasury, John Glen, said: “We want to make sure all young people can access the money which has been set aside for them, to invest in their future and continue a savings habit, as they turn 18.”
Here’s how the accounts work, how to check if you’ve got one, and how much it could now be worth.
CTFs are a government initiative for children born between September 1, 2002 and January 2, 2011.
Under the scheme, parents and guardians received a voucher to deposit into a CTF account on behalf of their child.
Vouchers were worth between £50 and £1,000 depending on when children were born, as well as whether parents were on a low income at the time.
These needed to be added to special CTF accounts provided by a variety of banks and investment companies, with parents choosing between a cash or stock and shares version.
Once the account was open, you could also add to it (the current limit is up to £9,000 a year) with no tax payable on the interest.
Where parents failed to deposit vouchers, HMRC will have done this for them. It put cash into so-called stakeholder CTFs that are linked to the stock market.
At 16, children can choose to operate their account or have their parent continue to run it, but they cannot withdraw the funds until they’re 18.
HMRC says 55,000 will mature each month from September as teens turn 18, with over 700,000 accounts expected to mature a year.
Under new rules, banks and building societies will be allowed to move money in a lost CTF into an Isa account if they haven’t heard from the parent or account holder before they turn 18.
How much is in accounts depends on what children initially got from the government and whether money was saved in a cash account or a stocks and shares account.
Investment company AJ Bell says someone who got two payments of £250, for example, one at birth and another on their seventh birthday, and invested it in the FTSE 100 index but made no further contributions, would now have a pot of £1,198.
If that same money had been saved in cash earning 2% a year it would be worth £668 today.
Alternatively, AJ Bell says someone who got two £500 contributions from the government – again, at birth and at seven) and invested it in the FTSE 100 would have £2,397 today or £1,336 if it was invested in cash earning 2%.
Meanwhile, stakeholder account provider OneFamily estimated in 2019 that there’s an average of £2,175 in its CTF accounts.
We helped one mum track down a lost CTF worth £800 for her son.
Most people can fill in this online form via Gov.uk to check if they have a lost account.
You’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you fill in the online form.
If you’re a parent looking for your child’s trust fund, you’ll either need your child’s Unique Reference Number – you’ll find this on your annual CTF statement – or their National Insurance number.
If you’re looking for your own trust fund, you’ll just need your National Insurance number.
Teens are normally sent a National Insurance number automatically in the three months before their 16th birthday, but you can track it down via Gov.uk if you’ve lost it.
Once the form is complete, HMRC will send you details of the CTF provider by post within three weeks.
For those who do not have the identifying information needed to access the online tool or for those who don’t have internet access, you can apply for information by post – although the system for this has yet to be set-up.
Meanwhile, parents and guardians who adopted a child or were given parental responsibility through a court will be contacted with further information.
Where children are in care, and there is no person with parental responsibility available to manage the CTF, the account is managed on the child’s behalf by a charity called The Share Foundation.