How to find out if you have an unclaimed Child Trust Fund

Almost £400m is languishing in Child Trust Funds, unclaimed by tens of thousands of young adults missing out on “free money”.

A recent investigation into the savings accounts by the spending watchdog, the National Audit Office (NAO), found an average of £2,700 sitting in each unclaimed trust fund.

The watchdog found almost half of these Child Trust Funds were at risk of being forgotten about and a quarter were left untouched one year after maturing.

Experts have warned that the longer accounts go unclaimed, the more they will be eroded by charges levied by the providers. The NAO estimates savings providers are collectively earning up to £100m each year through charges applied to the trust fund accounts.

No new accounts have been set up for more than a decade, but the forgotten funds could give a financial leg up to a generation of young people.

What are child trust funds?

Child trust funds were savings accounts set up by Gordon Brown’s Labour government for children born between September 2002 and January 2011.

Some £2bn was paid into the accounts to more than six million children between 2002-2011, with most children receiving around £250 each or rising to £500 for low-income families and children in care.

Does everyone have a child trust fund?

Yes, all children born within the eligible period received a fund regardless of their family wealth.

Parents and grandparents were able to contribute extra funds to the account until the child turned 18, at which point the funds could be withdrawn and either spent or reinvested.

The first cohort of savers turned 18 in September 2020 and roughly 320,000 accounts had matured by April 2021.

What happens if a parent didn’t set up a child trust fund account?

A third of Child Trust Funds were set up by HM Revenue and Customs on behalf of eligible children, because parents and guardians had failed to do so within a year of receiving the government voucher. 

The NAO has warned these accounts are at a higher risk of being forgotten.

How can I track down a Child Trust Fund?

Laura Suter, of fundhouse AJ Bell, said: “Many of these accounts have very high charges, meaning that all the time they go unclaimed providers are making huge sums that eat away at the capital.

“Many parents and children aren’t aware they even have the account, or don’t know who the money is with or how to track it down.”

If the provider which manages the Child Trust Fund is known, the account holder or their parent or guardian should contact the company to access or transfer the funds.

Myron Jobson, of fund supermarket Interactive Investor, said: “If you don’t know who the provider is, you can ask HMRC and they can tell you where the account was originally opened.”

What can I do with the money?

Once the money has been located account holders do not have to wait until they turn 18 to transfer the funds into another savings account, but they will not be able to access the money until they come of age.

One option is to transfer the fund into a Junior Isa. Ms Suter said: “For many people it will make sense to transfer it to a Junior Isa, where the charges are likely to be lower and you’ll have a much bigger investment choice.”

However, an account holder cannot have both a trust fund and a Junior Isa, so the entire sum will need to be transferred and the fund closed.

Ms Suter added: “Helpfully, the amount you transfer won’t count towards your annual Junior Isa limit. This means that you can transfer the entire child trust fund into a Junior Isa and still add up to £9,000 to it in the same tax year.”

There is no requirement to reinvest savings from a child trust fund once it has matured and the holder has turned 18. But young adults looking to make the most of tax-free investments could also transfer their funds to a stocks and shares Isa, without using up any of their annual allowance.