The first children to receive CTF accounts are set to turn 16 – but millions are missing out.
Parents are being urged to track down lost Child Trust Funds as the first children to receive the savings accounts are set to turn 16.
Up to one million of these Government-funded accounts are thought to have been lost or forgotten about. It means children are missing out on a vital savings boost as millions is left languishing in these forgotten funds.
Child Trust Funds (CTFs) were introduced in 2002 as a way of encouraging parents to save for their children. Every child born between 1 September 2002 and 1 January 2011 was awarded a trust fund, an account set up by the government with an initial amount of up to £500.
This initial amount came in the form of a voucher which parents could put in an account with a CTF provider of their choice. If they didn’t use the voucher the government did so on their behalf. Around 1.74 million accounts were opened in this way – almost a third of the total number of accounts.
Parents, family, friends and the children themselves could save money into the account up to a certain amount, most recently £4,260 a year.
In the following years, some six million children were enrolled into the government-funded accounts. But the Government stopped making these contributions in 2011 and the scheme became defunct, replaced that year with the Junior Isa (Jisa).
Those who already have a CTF can continue to save money into the account until it matures when the child reaches age 18. Similar to an Isa, there are savings and investment accounts available and there is no tax to pay on the gains made.
The 1 September marked 16 years since the launch of the Child Trust Fund and millions of pounds are languishing in these now-defunct accounts. The first children to receive a Child Trust Fund will be about to take over the managing of the account, which comes under their control when they reach age 16. In September alone some 75,000 CTF children will turn 16.
Gavin Oldham, chairman of the Share Centre, says: ‘If your son or daughter has their 16th birthday coming up, they’ll be one of the first young people able to control their own Child Trust Fund. While they’re not allowed to withdraw money in the account until age 18 they will now be able to have the statement sent to them, change their account provider and manage the investments themselves if they wish.’
According to OneFamily, the average amount held in a CTF by children born in 2002 is £2,175. Meanwhile, a child who had their CTF money invested when they were born and is now aged 16 could have achieved an investment return of 108.2 per cent in that time. That means, even if they only had the initial Government contribution of £500 they would now have more than £1,000.
Children with a CTF were widely argued to be at a disadvantage after Junior Isas were introduced – at which point the interest rates on CTF accounts dropped as well as the number of accounts on offer. After much campaigning, the Government agreed CTFs could be transferred into Jisas in 2015.
The current best rate available on a CTF is 2.25% from Skipton Building Society whereas the top Junior Isa rate is a significantly better 3.5% from Coventry Building Society.
Those who wish to switch from a CTF to Junior Isa need to contact their provider and request the switch and fill out a transfer form. You’ll need to ensure the Jisa provider accepts transfers from CTF accounts.
Steve Ferrari, managing director of child trust funds at OneFamily, says: ‘There is still an opportunity to earn money on these accounts and we urge parents to continue to invest in them. If you are unsure of what has happened to your child’s account or which provider it was originally invested with, track it down.’
To track down a lost pot head to HMRC’s website and submit your information; you should find out where your child’s CTF is within 15 days.
Junmi and tayo adeniyi
Find trust fund
Child trust fund
Lost the account
Need to find out what's and…
Need to find out what's and how to I find my child trust fund for 2 off my kids