For every child born in the UK between 1 September 2002 and 1 January 2011, HM Revenue & Customs was giving away free money. Yet unbelievably, despite several reminders, millions of pounds of this money remains unclaimed.
The scheme was known as the Child Trust Fund (CTF) and was meant to encourage parents to save for their children. Initially, an amount of £500 was awarded to each child born between 1 September 2002 and 2 August 2010 in two tranches – £250 at birth and a further amount at age 7. From 3 August 2010 until the scheme closed on 2 January 2011, the amount was reduced to £50. The amount was awarded in the form of vouchers which parents could present to a CTF scheme provider (often a High Street bank) to be invested as a Stakeholder account, a shares account or as a bank account. The CTF account, once opened, could then be added to by other members of the family up to (currently) £4,260 per child per year. Except in very few exceptional circumstances (such as terminal illness), the investment could not be withdrawn until the child reached 18 but from age 16, the child could receive statements and could control the investment of the funds.
If the parents did not claim the initial award for whatever reason, the government themselves opened an account on behalf of the child. It is these accounts that have often been forgotten about and are largely still unclaimed. Of all the CTF accounts opened, it is thought that over 1.9 million CTF accounts were opened by the government in this way and, at last reports, over 1.7 million are still waiting to be claimed.
As the government-invested CTF funds are highly unlikely to have been actively managed on behalf of a child – the funds will have been deposited and just left there – it is important that these accounts are not only claimed but are also reviewed to determine whether any decisions on their performance need to be made – perhaps by converting them into a Junior ISA
Even if the child was born towards the end of the scheme and received one of the smaller rewards, it is still free money from the government which can be claimed
If you are unsure whether your child has an unclaimed CTF account, you need to go online and ask HMRC at https://www.gov.uk/child-trust-funds. (You will need a Government Gateway reference if you do not already have one, so you may need to register with HMRC before you can start the trace)
Once you have found your child’s CTF you are able to transfer the funds into a Junior ISA which works broadly under the same rules (that the funds cannot be withdrawn until age 18) but often the fees are lower. You will need to shop around though as it is reported that not all Junior ISA providers accept the CTF vouchers. There are also restrictions to prevent you holding both a CTF and a Junior ISA simultaneously so the CTF will have to be closed when the Junior ISA is opened
Whilst the vast majority of these “forgotten” accounts cannot yet be encashed – as the youngest claimants are just turning 16 at the moment – isn’t it better to have this money under your control than languishing unloved in location of HMRC’s choosing?