National Audit Office investigation reveals many young people are still unaware of cash pot in their name.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The National Audit Office’s investigation into Child Trust Funds lays bare the high level of apathy for the account. The NAO probe found that 145,000 18-year-olds had not claimed a total of £394 million by April 2021. With the typical CTF invested in stock and shares valued at £1,911, these individuals could be sleeping on a decent amount of money that could boost their financial resilience amid the cost-of-living crisis.
“But the value of CTFs could be eroded the longer they are left untouched because of charges levied on the account. The NAO estimates that CTF providers could be earning collectively up to £100 million per year through charges on accounts – so it pays to act quickly.
“The NAO seemingly laments the fact that is nigh on impossible to establish how many people may have lost track on their investments in Child Trust Funds because of a lack of available data. The fact remains that the onus is on parents/guardians and now adult children to trace a lost CTF.
“If you know the provider where the Child Trust Fund is held, the first port of call should be contact them directly. If you don’t, you can ask HMRC. They can tell you where the account was originally opened.
“For the youngest holders, there are still six years before their Child Trust Fund reaches maturity. If you hold a Child Trust Fund for your child, it is worth considering transferring to a Junior ISA. It is a no brainer in most instances as Junior ISAs tend to have better rates on cash savings, more investment options and lower charges.”
- A CTF is a long-term tax-free savings account for children born between 1 September 2002 and 2 January 2011, which they can access when they turn 18. The government paid more than £2 billion into CTFs for 6.3 million children born during this period. Most children received around £250 each from the government at the time their CTF was started, while those from low-income families or in local authority care received an additional £250.
- The NAO found that CTFs are at risk of becoming forgotten or lost track of by the account holder. As more young people with a CTF turn 18, an increasing number can access their accounts. However, latest estimates indicate that more than a quarter of CTFs have remained untouched for a year or more after their owners turned 18.
- The NAO estimates that CTF providers – including banks and building societies – could be earning collectively up to £100 million per year through charges on accounts.
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