Two million 16-year-olds with up to £4,500 in FREE cash in lost accounts – is your kid one of them?
PARENTS are being urged to check if their kids have one of 1.9million lost child trust funds that could have thousands of pounds of cash stuffed in them.
The warning comes as this Sunday (September 1) sees the first child trust fund holders turn 17, which means they're a year away from getting their hands on money in accounts.
And from age 16, kids are allowed to takeover the management of accounts from parents so it's vital to track down lost accounts to make sure you're getting the most for your money.
The Sun found that in total, 6.3million child trust fund accounts were opened with 4.4million of these by parents on behalf of kids who put the money into a cash version or a stocks and shares version.
This left 1.9million "secret accounts", which were opened by HMRC on behalf of parents with cash saved in stocks and shares - these are known as "stakeholder accounts".
According to One Family, which says it's the largest provider of child trust funds with 1.6million currently set up, its savers have an average of £1,855 stashed away.
What should I do with lost CTF cash?
ALTHOUGH parents can no longer open a CTF, they can continue to save into them or transfer them to a Junior Isa.
Both have a limit of saving up to £4,368 a year until the child is 18.
It’s worth noting that children can take control of their account from age 16, although they cannot make a withdrawal until they reach 18.
The best Junior Isa on the market, from Coventry Building Society, currently pays 3.6 per cent - more than 1 per cent better than the best cash child trust fund open to all, a Skipton Building Society fund paying 2.5 per cent.
Working on a cash basis is easier than tackling stocks and shares, but you’re unlikely to make as much money.
Given children have time on their hands to weather any bumps along the road, investing in stocks and shares could enable them to grow their money more in the long-term.
Justin Modray, financial analyst at CandidMoney.com said: “The default stakeholder accounts are relatively safe bets, but there will always be better options on the market.
“Look around, take advice, switch and watch your child’s money grow.”
But you could have even more as fellow child trust fund provider, BMO Global Asset Management, reckons there's an average of £11,800 in its stocks and shares accounts.
While it believes there's an average of £4,500 sitting in stakeholder accounts and £353 in cash accounts based on the amounts saved in its own CTFs coming to maturity.
Nici Audhlam-Gardiner, managing director of child trust funds at OneFamily, said: “This anniversary provides an opportunity for parents to talk to teens about their account, by engaging them early they can help instil good saving habits that will be beneficial as they grow older.
“We are urging parents to continue to invest into these accounts and if they are unsure of what has happened to their child’s child trust fund, or where it was originally invested, to track it down."
What are child trust funds?
Child trust funds were introduced to help parents get a head start on preparing for their child’s future.
The policy meant that anyone born between September 1, 2002 and January 2, 2011 could receive a child trust fund voucher from the government.
This was worth between £50 and £1,000, but parents and friends could build on this pot by adding to it.
How can I check if I've got a missing child trust fund?
Parents can find out where their child’s account is by completing a .
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You’ll need a government "Gateway" user ID and password. If you do not have a user ID, you can create one when you fill in the online form.
HMRC’s investigators will then track down the account. It aims to let the parents know where their child’s allowance is within 15 working days.
Once a child trust fund has been found, parents or guardians can switch from account to a , which typically pay better rates for cash savings.
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