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29 Aug 2021

Thousands of teenagers could be missing out on over £171 million in child trust fund savings

Which? explains how to track down a lost child trust fund

Hundreds of thousands of teenagers could be missing out on millions of pounds in matured child trust fund savings accounts, experts estimate.

Analysis from wealth management platform Hargreaves Lansdown suggests 114,000 teenagers could be missing out on £171.4m, which amounts to an average holding of £1,500 each.

Around 6.3m government-backed child trust funds (CTFs) were opened during the time the scheme was open, and 1m of these are thought to have been lost - but it's still possible to track them down and gain access to the money that has been saved in your name.

Here, Which? explains what CTFs are, how to track them down and what you can do with the cash.

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What is a child trust fund?

Child trust funds were a range of tax-free savings products for children born between 1 September 2002 and 2 January 2011, introduced by the government in April 2005.

The accounts aimed to encourage long-term savings habits, and ensure all children received a financial boost when they reached 18, when the accounts matured.

The government sent out vouchers to parents of eligible children, worth either £250 or £500 (depending on the household's circumstances), to be used as an opening payment for the account. Once the account was open, parents or grandparents could deposit up to £4,260 in each tax year.

The money could be saved in a cash CTF to earn tax-free interest, or two investment options - a stakeholder CTF, where money was placed in stock market investments, or a shares-based CTF where parents could pick an investment fund or choose their own investments.

Children can manage the accounts themselves when they turn 16, but cannot withdraw the money until they're 18.

The 1 September 2021 marks almost a year since the first wave of CTFs matured. In that time a further 720,000 CTFs matured, but Hargreaves Lansdown's analysis suggests 114,000 teenagers may not realise they have an account.

How to track down a lost child trust fund

In cases where a child's parents didn't use the government voucher to open a CTF, the family were receiving child tax credit, or the child was in care, HMRC opened a CTF for the child and paid in the government voucher.

Many children who had these accounts opened on their behalf have no idea they exist - but you can easily check for a lost CTF on the government's website.

If you're looking for your own CTF, you'll need your National Insurance number. There's an online form you can fill in to find out where the account was opened - you'll need your government gateway login details if you've already set up an account, if not you can set one up when you want to fill out the form.

HMRC should send you details of the CTF provider by post within three weeks - you'll then need to contact the provider about your account.

If you're looking for your child's CTF, you'll need their National Insurance number and Unique Reference Number, which is printed on their CTF statements.

If your CTF has matured

If your CTF has matured, then it's totally up to you what you do with the money.

To continue the tax-free saving habit, you could move the cash to an adult Isa. You can deposit a total of £20,000 in each tax year across all Isa savings.

Alternatively, you could move it to a savings account; while interest rates are low it's unlikely you'll need to pay any tax on your savings interest, unless you're an additional-rate taxpayer and don't receive any personal savings allowance.

Basic-rate taxpayers can earn up to £1,000 tax-free in savings interest, while those who pay higher-rate tax have an allowance of £500.

My CTF hasn't matured - what can I do with it?

If you're under the age of 16, your CTF can only be managed by your parents or guardian. The cash cannot be withdrawn, but the account can be transferred to a Junior Isa - which has both cash and stocks and shares options.

The Junior Isa would still be in the child's name, and they can gain access and control over the money when they turn 18.

If you're over 16, you can manage the account yourself - so, if you want to move it to a Junior Isa, you'll be able to do so.

Before you make any transfers, make sure you're aware of the amount saved in the CTF (a Junior Isa only accepts up to £9,000 in each tax year), and whether any exit fees may mean you'll lose out by moving the money.