Over £ 2bn of the Child Trust Fund is undrawn in the UK. Photo: Getty
With restrictions lifted across the UK, hundreds of thousands of school leavers will decide what to do next.
With travel largely off the table, many will decide whether to take the plunge and go straight to university or perhaps set up a business or a new job on their own.
And having a lump of cash to back up her decision will be a welcome relief.
Young people who have reached the age of 18 after September 1, 2020 now have direct access to their Child Trust Fund for the first time.
The funds were set up by the former Labor government in 2002 to provide all children with a nest egg that they can use to enter adult life without parental control.
HMRC figures show that over 700,000 accounts worth £ 1.6 billion ($ 2.2 billion) will mature in the next year alone.
But a large chunk of those accounts due – an estimated 58% – have yet to be claimed, even though their average value is £ 1,500.
“It’s a big challenge and a big problem. As people get older, they move around and become less accessible. There’s a lot of work to be done on it,” said Gavin Oldham OBE, chairman and founder of the Share Foundation.
What is a child trust fund?
All parents and guardians of children born between September 1, 2002 and January 1, 2011 received a voucher from the government.
Children born between September 1, 2002 and July 31, 2010 received a minimum of £ 250 at birth. This rose to £ 500 for low-income households.
All of these children were given an extra £ 250 on their 17th birthday. Lower income families can claim up to £ 500.
Children born later, between August 1, 2010 and January 1, 2011 received £ 50 at birth or between £ 100 and £ 500 if they had limited financial income. No additional payments were made at the age of seven. All payments were suspended as of January 2, 2011.
Parents were able to put the money into a number of funds, but if they didn’t redeem the voucher within a year, the government automatically deposited it into an income account.
Children can take control of the money at 16 and withdraw the money at 18.
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How do I find a fund?
All funds can be tracked whether they are set up by the parent / guardian or the government.
“If you’ve lost track of your child’s CTF, the first thing to do is check to see if you have any paperwork. If you didn’t make a decision, the government would have selected a stakeholder CTF for you. If you don’t know where? That means you can find your CTF through the government website – as long as you have parental responsibility for the child, “said Sarah Coles, personal financial analyst at Hargreaves Lansdown.
There are two ways to find your child’s account. The first is done through HMRC by logging into the Government Gateway or signing up for an account.
You will need the child’s unique reference number, which can be found on an annual Child Trust Fund statement, or their national insurance number.
Once the online form is completed, HMRC will inform you of the provider managing your child’s assets. You should get a response within 15 days, but keep in mind that this could be a letter requesting more information such as a birth or adoption certificate.
An alternative option is to use ShareFound’s simplified search process that doesn’t require you to set up a government gateway account.
And when you Know the child trust fund provider but lost their login details, which can be found on the government website.
How much will go into the fund?
The starting fund amount varied from £ 50 to £ 500 depending on the child’s birth date and household income.
Some children were given an additional £ 250 to £ 500 on their seventh birthday. All payments were suspended from January 2, 2011 when the scheme was canceled.
There is at least £ 9.3bn in CTFs, about a quarter of which, over £ 2bn, is not yet claimed. The current value of each of these accounts ranges from £ 996 to £ 1,992 with no additional funds added.
Parents were encouraged to put regular savings in these accounts, from just £ 10 a month to £ 4,368 a year.
The amount in a fund depends on what the state pays in, whether parents have topped it up, and what income the fund has received.
