Almost two million children could be due for a windfall worth around £1,600 each. Moneywise investigates
Around £2 billion is owed to children aged between eight and 18 but is currently unclaimed.
Child Trust Funds (CTFs) were set up by the former Labour government in 2002 to provide all children with a nest egg with which to embark on adult life.
However, many families have lost track of accounts or never activated them in the first place.
The challenge of uniting children with their funds became even more pressing from September, as the first recipients turned 18 and became entitled to access their money.
There are currently 1.8 million unclaimed accounts – around 30% of all the funds – which mature after 18 years.
Gavin Oldham, chairman and founder of The Share Foundation, which runs Junior Isa and CTF schemes for children and young people in care, says: “It affects the most disadvantaged people in society. Tracing these funds could alter the prospects of a whole generation. But insufficient effort is being made to link families with their accounts.”
All parents and guardians of children born between 1 September 2002 and 1 January 2011 inclusive received a voucher from the government. This could be used to invest in a range of funds and the amount they received varied depending on their income and the date.
Children born between 1 September 2002 to 31 July 2010 received at least £250 at birth. If the child was born into a family where the household income was £16,190 or less, then the initial payment was £500.
All of these children also received an additional £250 on their seventh birthday. Again, lower income families could have claimed more at up to £500.
Due to government cutbacks, children born later, between 1 August 2010 and 1 January 2011, received £50 at birth, or between £100 and £500 if they were of limited financial income (based on a variety of measures). No additional payments were given at age seven. All payments stopped from 2 January 2011.
Children born in Wales during this later period still received a reduced extra payment of £50 – or £100 if they were from a low-income household – at the age of seven.
From April 2010, a child eligible for disability living allowance also received a yearly top-up of £100, or £200 if the child had a severe disability.
Initially there was a range of funds in which the money could be invested, but most of these were subsumed by financial services provider OneFamily, which now looks after a quarter of the funds.
Once a child turns 16, they can take control of their funds but they can only withdraw the money once they turn 18. Parents are not able to withdraw funds at any point.
“It is taking me months to track down my children’s funds”
Writer Sophie Fletcher lost track of her children’s CTFs after moving home several times.
Moneywise tried to help the mother-of-two track down her funds but found the process took much longer than expected.
Nine weeks after she initially requested the information, Sophie, who lives in Cheltenham, is still waiting for the details from HMRC.
“It is not a very efficient process. I thought it would be immediate, but it seems to be quite lengthy and they make you jump through quite a few hoops,” she says.
Mrs Fletcher, 45, remembers receiving a £500 CTF voucher for sons Gabriel, 13, and Oliver, 11, soon after they were born.
She invested the money in a fund but then lost the paperwork.
“After your first baby, it’s all a bit of a blur. I thought it was a great bonus at the time, but I just forgot about it as it seemed so long away before they could access the money. The kids have several accounts because I started one that I put money into and they had one from their grandparents.
“We moved house a few times and moved from the North to the South, and things just got lost along the way,” she adds.
Following guidance from Moneywise, Sophie completed the HMRC forms to locate the funds. A couple of weeks later she received an acknowledgement letter saying HMRC would be in touch soon.
Several weeks later, she received a second letter asking her to send a copy of her children’s birth certificates to HMRC.
She did this straight away and a month later still had not heard anything. Her advice to other parents is “give yourself a good six months” to track down the funds.
Despite widespread publicity, a third of all the CTFs were never activated. Many of the vouchers were sent to the wrong addresses or the parents could not be traced.
Parents had 12 months to invest the voucher and if they did not the government allocated them an account on their behalf.
These so-called ‘zombie funds’ were divided up evenly among 14 providers: Family Investments (now OneFamily), Engage Mutual Assurance (now part of OneFamily), Foresters Friendly Society, Halifax Financial Services, Healthy Investment, Kingston Unity Friendly Society, NatWest, Nottingham Oddfellows Assurance Friendly Society (now Oddfellows), Pilling & Co, RBS, Scottish Friendly Asset Managers, Sheffield Mutual Friendly Society, Shepherd’s Friendly Society and Ulster Bank Limited.
According to Mr Oldham, 80% of the least well off – who received the full voucher amount – did not activate their accounts.
“These accounts are worth around £1,600 each. That is a life-changing amount of money to an 18-year old. But, currently, £1.5 billion to £2 billon is lost to these children.
“HMRC is bending over backwards to try to help people but it doesn’t have the resources to do it. It is essential that the government takes ownership of the scheme as it affects so many young people,” he adds.
Moneywise approached the Treasury for comment but it did not respond.
To try to tackle the problem, The Share Foundation has set up ambassadors to visit secondary schools and make pupils aware of the CTF and how to trace it.
But questions remain over what will happen to these funds once they mature – the government is set to publish a consultation on the matter later this year.
Myles Edwards, membership director for Foresters Friendly Society, says the financial services industry has been engaging with HMRC and the Financial Conduct Authority over the past year to look at this issue, but there are still many unanswered questions.
“What should a provider do if it is holding a government-allocated fund for a CTF, which reaches the point of maturity? What can they do with the funds – including returning the investment,” asks Mr Edwards.
“If they hold on to it, what product do they transfer it to? How long for and what type of investment risk should be taken with it? Are the funds to be reallocated back to the government? If so, how and when?”
What could your CTF be worth?
At least £9.3 billion is sitting in CTFs, of which around a quarter is still unclaimed. The current value of each of these accounts, if no additional funds have been added, is between £996 and £1,992.
Parents were encouraged to put regular savings into these accounts, from as little as £10 a month up to £4,368 a year.
Those 17-year olds whose parents saved just £10 a month, based on a maximum government investment of £500, would now have £3,610 in the account.
How to trace a fund
If you know the CTF provider but have lost its access details, you can find them via the government website Gov.uk/government/publications/list-of-authorised-child-trust-fund-providers.
If you do not know the fund provider or did not set up the account, you can trace the CTF at Gov.uk/child-trust-funds. This includes accounts for adopted children.
You will be asked to complete an online form, which will include setting up a Government Gateway account if you do not already have a user ID.
Once you have completed the form, you should receive a response within 15 days, but bear in mind this may be a letter asking for further information such as a birth or adoption certificate.
“My daughter missed out due to a child benefit loophole”
When applying for her second child’s fund, 47-year-old Maxine Yates thought it would be a straightforward process.
But she was told her daughter Eloise was not eligible for a CTF despite the fact she was born in October 2010, before the scheme was axed.
Moneywise investigated on behalf of Maxine and discovered a loophole in the system, which meant she could not claim the £50 voucher.
This is because she did not register for child benefit before the CTF cut-off of 2 January 2011.
“My eldest had just started school, it was coming up to Christmas and we were getting into a new routine. As soon as I caught my breath in mid-January, I applied for the child benefit,” she says.
However, OneFamily and The Share Foundation both confirmed that the CTF was activated by this later child benefit claim – not from the child’s date of birth.
Maxine, who works in marketing and lives in Tamworth, says she wasn’t aware that the CTF scheme was coming to an end or that it was linked to child benefit – otherwise she would have acted sooner.
She says: “When I claimed Archie’s fund it was all fine. He was born in 2007 and we got £250. It is quite frustrating that it was not the same process with Eloise. I had no idea of the cut-off or that it was a different amount of money.
“The system is not obvious, it appeared that Eloise should be entitled. It should be the law that she gets it. You would think it would be based on the date of birth.”
Child Trust Fund
I read in the Lily Canter piece online 'Is your child owed a share of £2 billion' then the top up £250+ to the original Child Trust Fund was paid at age seven. But that was only true for children who were seven before 2011, as George Osborne, Chancellor, decided to abolish top up payments. That was not made clear in the piece.