Right now, we could all use a windfall. For most of us, it seems like a desperate dream, but for more than 400,000 young adults, it could be a reality.
There’s an unclaimed pot of nearly £950 million, and there could be more than £2,000 in it in your name.
The money is in Child Trust Funds (CTFs), which were paid out to all children born between September 1, 2002, and January 1, 2011.
How much you get depends partly on when you were born. Until August 2010, each child got £250 (or £500 for children from low-income families) to pay into a CTF, and the Government topped up the amount by a further £250 at age seven. After the Coalition Government came to power in 2010, the amount was cut so children only got £50 (or £100 for children from low-income families), and the top-up at age seven was removed, but older children could get up to £1,000.
Your share will also depend on where the money went. Parents can choose between cash accounts or a range of investments. If they don’t make a choice, the government will put the money into a stakeholder CTF (a type of investment CTF). Many of these accounts will therefore also have seen investment growth in recent years.
Read more: Child Trust Fund: How families get money for disabled young people
The final variable is that friends and family may have contributed to the account each year.
But even without topping up, you’d be surprised at how much is there – the most recent data we have is from April last year, when the average was £2,031.
It seems outrageous that so much money is lying idle in these accounts. But government figures show that of the 956,000 accounts due by April last year, 428,000 had not yet been claimed.
In fact, there is more money in maturing, unclaimed CTFs (£943 million) than in that which has been claimed or transferred to ISAs (£844 million).
Part of the problem is that many people have no idea they ever had a CTF. New parents were given a voucher and information about where to save or invest, but if they didn’t get around to making a decision, HMRC did it for them.
Of the 6.3 million accounts, 1.8 million were opened by HMRC, so there’s a chance no one in the family ever knew where the money went. Others were lost over the years because people moved and forgot to update their details.
Even if parents know exactly where their money is, this represents a huge missed opportunity. In the 2021/22 tax year, £433 million was paid into CTFs.
It may seem like a simple way to build up a nest egg for your children – you already have the account, so you might as well use it. However, it has a lot less to offer than a Junior ISA (JISA) and you can switch from one to the other now.
Read more: Interest rates: When will the mortgage crisis in Great Britain end?
The two accounts offer the same tax benefits; the annual limit is the same; the money is locked until the child turns 18 and belongs to the child from that point on. However, the JISA account offers a number of advantages.
If you prefer to keep your money in cash, they usually offer better interest rates. Currently, you can get more than 4% with a JISA, while the best CTF offers around 3%.
If you invest in an investment CTF, you may be paying too much in fees, as stakeholder CTFs are essentially tracker funds with a fee cap of 1.5%. JISAs tend to be much cheaper – an equivalent tracker costs almost a third. CTFs also often offer only a fraction of the investment opportunities available through JISAs.
If you have lost a CTF, you can find it on the government website. You will need to log in to the Government Gateway or create an account. Then you can fill out a form with your details and you will be informed of the provider holding your cash.
Watch: Simple tips for budgeting when moving out of your house
Download the Yahoo Finance app, available for Apple And Android.
