HM Revenue & Customs has urged young people to track down their child trust fund accounts, after figures showed that more than 670,000 18-22 years olds are yet to claim their cash.
There is currently around £1.4 billion in unclaimed accounts, with a further £7.5 billion still held by under 18s. The average pot is worth £2,212.
Child Trust Funds are long term, tax-free savings accounts which were set up with the government depositing £250 for every child born between September 2002 and January 2011. More than a quarter of accounts were set up by the government rather than parents before they were discontinued in 2011.
HMRC said young people or their parents should contact their fund provider directly if they know who they are. For those who are unsure, they can access an online tool through the government to find their provider.
Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive said: “Thousands of Child Trust Fund accounts are sitting unclaimed – we want to reunite young people with their money and we’re making the process as simple as possible.”
Charlene Young, pensions and savings expert at AJ Bell, said many parents and children are not aware they have an account, or are unsure how to track it down. However, providers are charging significant sums for managing the accounts, eating into the money.
“The Public Accounts Committee report indicates many accounts are charging 1.5% annually for a portfolio of passive funds, where a JISA on a modern platform might cost around 0.25%, plus the cost of a track, which can be a s little as a few basis points.
“More than a quarter of CTF accounts were set up by the government because parents failed to do so within the 12-month window. This highlights why so many are unclaimed as the parents either weren’t aware or won’t remember that an account was even set up for their child, let alone where the money is now.”
Young said those with accounts can choose what to do with the money, including withdrawing it or transferring it to an adult ISA.
She added: “Anything you transfer to an adult ISA at maturity will not count towards your annual ISA allowance, which is £20,000 for over 18s. For many young people who have CTFs but are still under 18, it will make sense to transfer it to a Junior ISA, where the charges will likely be lower, and you’ll have a much bigger investment choice.
“The money will still be locked up until you turn 18, but the tax-free benefits of ISA investing still apply. You can transfer the entire CTF into a Junior ISA and still add up to £9,000 to it in the same tax year.”
