Check your Child Trust Funds!
When I read in the news that £1.7 billion was sitting in abandoned Child Trust Funds, I can’t say I was hugely surprised. While both of my children have them, the system wasn’t the best designed scheme the government has introduced.
As you may remember, Child Trust Funds (CTFs) were introduced by the New Labour government in 2005 in a move designed to encourage parents to save for their children’s futures.
Every child born after 1 September 2005 was entitled to a £250 voucher, which parents could invest in a CTF of their choice. When their child reached the age of 7, they would be entitled to another £250. Children from low income backgrounds would be given a total of £1,000 for investment.
Towards the end of the initiative, it was scaled back. Children born between August 2010 and January 2011 were given £50, with those from low income households receiving £100. Payments to children who turned 7 were also scrapped in August 2010.
The main idea behind the scheme was that the payments would encourage parents to add to the CTF, meaning the child would reach the age of 18 with a useful sum of money to get started in their adult life. They could then use the cash to help them through university, put a deposit on a house or even start a business.
That was the plan. The reality turned out to be rather different.
The first problem was that many families didn’t claim the CTF vouchers in the first place. However, that was solved quite simply – in these cases the taxman simply invested them on the child’s behalf.
In my own case, I claimed the vouchers for my elder child and invested them in a stocks and shares CTF. I’m ashamed to say that I forgot to invest the vouchers for my younger child – although I later tracked down where they had been invested and transferred them.
Unfortunately, this is something that many families have not done. It’s now estimated that up to £1.7 billion in CTFs have been unclaimed, with banks and building societies saying that families have moved away and are untraceable.
Even if parents never topped up a child’s CTF, many of them could be worth over £1,000 today, with those belonging to children from low-income households potentially being worth over £2,000.
If you never claimed your CTF vouchers, it’s worth tracking them down so that your child or children benefit when they turn 18. If you did claim them, it’s worth knowing that you are now allowed to transfer Child Trust Funds into a Junior ISA, which will often give a better rate of return.
But to do either, you need to know who holds your children’s current CTF. To discover that you can apply to HMRC via to Government Gateway to get details of the CTF provider.
With required house deposits continuing to be high and university becoming ever more expensive, it could be one of the best early 18th birthday presents you could give them – completely free of charge!
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.