Families urged to track down £1.4 billion in forgotten child accounts

The Government has urged people aged 18-22 to come forward and claim their share of £1.4 billion stashed in matured Child Trust Funds. Government data released last week showed that around £10 billion is sat in Child Trust Fund accounts, with £1.4 billion in unclaimed accounts and £7.5 billion in accounts still held by under 18s.

When someone reaches their 18th birthday, they can access the money in the child trust fund, but many people have lost track of the account or don’t even realise it exists. The government plea highlights the magnitude of the problem of ‘continuing Child Trust Funds’ – where a child has turned 18 but their funds go unclaimed. Over half of the money in these accounts – £776 million – matured over a year ago.

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. A report by the Public Accounts Committee published last year found many Child Trust Fund providers are charging huge sums for managing the accounts, eating into the money. The report indicates many accounts are charging 1.5% a year for a portfolio of passive funds, whereas a Junior ISA on a modern platform might cost around 0.25%, plus the cost of a tracker, which can be as little as a few basis points

More than a quarter of Child Trust Fund accounts were set up by the government because parents failed to do so within the 12-month window. This highlights why so many are unclaimed – as the parents either weren’t aware or won’t remember that an account was even set up for their child, let alone where the money is now.

Any child born between 1 September 2002 and 2 January 2011 who hasn’t already got details of their account should track it down. You can go to this online tool and fill in a form to trace the money, using your national insurance number and date of birth.

Once you’ve tracked down the money, you can choose what to do with it. Your options are to transfer it to an adult ISA or withdraw the money. Until then your money will just sit in an account that no one else has access to, possibly paying very high charges. Anything you transfer to an adult ISA at maturity will not count towards your annual ISA allowance, which is £20,000 for over 18s.

For many young people who have Child Trust Funds but are still under 18, it will make sense to transfer the account to a Junior ISA, where the charges will likely be lower and you’ll have a much bigger investment choice. The money will still be locked up until you turn 18, but the tax-free benefits of ISA investing still apply. 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.