Your finances can be incredibly tight when you’re starting out in adult life. The HL Savings & Resilience Barometer shows that, on average, households headed by people aged 20-24 have just £77 left at the end of the month, after covering the essentials. Yet at the same time, more than 400,000 of these young people could have as much as £2,000 with their name on it – just sitting, waiting to be claimed.
This cash is from Child Trust Funds (CTFs). These were the brainchild of the last Labour government, which gave every child a voucher worth £250 at birth to save or invest. Those on lower incomes were entitled to up to £500, and the oldest children in the scheme also had a top up at the age of seven. Anyone could also pay extra cash into them at any time – up to an annual limit. The money was locked away until the child turned 18, at which time they were entitled to a nest egg.
They were given to all children born between 1 September 2002 and 1 January 2011. The older children will have received the most, because after the coalition government came to power in August 2010, they were scaled back, so children received £50 (or £100 for those from lower income families), and those aged seven no longer received the top up. Then from 1 January 2011, new CTFs were scrapped altogether.
Plenty of the older children are now 18 – and an alarming number of them haven’t claimed their money. Last year HMRC urged 430,000 18-21-year-olds to reclaim funds worth an average of £2,000 each.
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It’s no surprise that so many of them have gone missing. If you didn’t do anything with the voucher, HMRC stepped in and invested it for you, so some parents may never have really registered where the money was. There were 6.3 million of them opened in total – 1.8 million of them by HMRC – so there’s a good chance that the 430,000 lost, matured accounts are just the first of many.
If you’re over 18 and you don’t know where the money is, it’s relatively straightforward to track down. Signing up for the online Government Gateway takes a bit of time, because you need to wait for them to send you a code, but once you have that, you can put your details into the system, and it’ll tell you exactly where your money is. Then you can contact the company holding it and arrange to get your hands on it.
If you have a child who qualified and is under 18, as long as you have parental responsibility, you can track it down in the same way. It might not feel like the most urgent job – especially if your child is younger, but there’s a benefit in doing it sooner rather than later.
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You can now switch from a CTF to a Junior ISA. The two accounts have the same tax benefits; the annual limit is the same; the money is still locked away until the age of 18; and it will belong to the child at that stage. However, if you’ve opted for a cash CTF, you can get a better rate in a JISA, and if you’re in an investment CTF, you may be paying over the odds in charges. It’s worth emphasising that if you’re putting the money away for a long period like 18 years, you’re likely to see much more growth in investments than savings.
Regardless of whether the savings or investments are switched or stay in CTFs, at the age of 18, they belong entirely to the child. It means the intervening years aren’t just an opportunity to track the money down. It’s also a chance to introduce your offspring to key ideas behind saving and investing for the future, in the hope that when they get their hands on the cash, they can use it to make a real and lasting difference to their lives.
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