3/4 Million Young Adults Not Claimed Matured Child Trust Funds

At the start of this month, HMRC issued a call for hundreds of thousands of young adults aged 18-23 to track down and claim their Child Trust Fund savings account.

In its release, HMRC suggests:

• 758,000 matured Child Trust Fund accounts remain unclaimed.
• The average Child Trust Fund is worth more than £2,240.
• Young people are encouraged to find their matured Child Trust Fund quickly and for free using the GOV.UK locator tool.

Child Trust Funds (CTF)

Were tax free savings accounts (set up under the last Labour government), that were opened for every child born:

• Between 1 September 2002 and 2 January 2011.
• At the start, the Government issued each child a £250 voucher that parents (and legal guardians) could open up a CTF where they wished to.  By default, if the voucher was not used, the government set up a default account for them.
• For low-income family children, the government added an extra £250 directly into the account.
• Parents were then encouraged to invest in the tax-free child trust fund each year within an annual allowance.
• At age 7, the government then invested another £250 in the CTF account (plus an additional £250 for low-income family children).
• At age 16, the child gained control and at age 18, they could cash in if they chose.
• CTFs were then gradually replaced by the Junior ISA (by the conservatives and, free government contributions stopped).

Given we have just passed the 23^rd Anniversary, some unclaimed CTFs are clearly for those young adults that are now aged 23 and yet still unclaimed.

Government Trace Service

If you (as a young adult) or your child has a CTF that you cannot find, HMRC offers a free tracing service via:

https://www.gov.uk/child-trust-funds/find-a-child-trust-fund

Comment

The CTF was supposed to encourage the habit of saving and not make having money invested for them, the domain of wealthier families only.  Given 20% of CTFs have remained unclaimed, they were clearly not that important and Labour’s policy failed.

There were 6.3 million CTF accounts opened between 2002/2011 (9 years).  Therefore, there are still some 14-18 years olds yet to claim.  Given, there are already 758,000 unclaimed accounts from the first 5 years of operation, another 4 years of say a comparable 600,000 unclaimed accounts to come, we could be at 1.4 million unclaimed accounts.  What a disaster and yet another failed policy.

We considered this a total waste of public money at the time (as did the Liberal Democrats).  The Lib Dems would have redirected the £500m spent into early years programmes. 

We however, would have invested this £0.5bn in financial education at schools and using the combined skills of teachers and ourselves (and other advisers) as chartered financial planners and financial educators to deliver educational courses throughout the curriculum to ensure nearly all children leave school with some useful tools.

• Pythagoras and Boyle's Law may be useful for a few budding scientists and mathmeticians, as are Newton's 3 Laws, but not many!  Knowing the value of money, bank accounts, how mortgages work, house deposits, renting a property, PAYE, starting a business, bank loans, credit cards, pensions and tax relief as well as taxation in general are much more valuable life skills. 

In any event, if you are aged between 18 and 23, use the above link to trace and claim your CTF.