Child Trust Funds: how to find lost accounts and manage your savings
More than 100,000 teenagers in the UK could be missing out on money in a lost Child Trust Fund account. Learn how Child Trust Funds work and the best way for young savers to make a return on their money.
More than 114,000 teenagers in the UK could be missing out on the opportunity to unlock their share of £171.4 million worth of savings in Child Trust Fund accounts, according to new research from investment platform Hargreaves Lansdown.
The first Child Trust Fund accounts were launched in 2005 and made available to all children in the UK born between 1 September 2002 and 2 January 2011. They began to mature on 1 September 2020, as the first recipients turned 18. Since then, around 720,000 of the 6.3 million registered Child Trust Fund accounts have matured.
After accounts mature, the owners gain full control of the money. They can choose to withdraw their savings or transfer them into an adult savings account or ISA.
Unfortunately, an estimated one million people are out of touch with their Child Trust Fund accounts and may not receive notification that they have savings waiting to be withdrawn. This means that teenagers in the UK could be missing out on a windfall. The average Child Trust Fund account has a holding of £1,500.
While some account holders may have lost track of their funds when they changed addresses, others may be unaware that one was opened in the first place. Around 30% of Child Trust Fund accounts were set up on behalf of children by HM Revenue and Customs (HMRC). But some parents and guardians may have missed the notification that an account was opened for their child.
We want to help connect people with their funds. Here, we explain how a Child Trust Fund works, how to trace a lost Child Trust Fund (or find out if you, or your child, have one) and what savings options are available for matured Child Trust Fund accounts.
What is a Child Trust Fund?
A Child Trust Fund is a long-term, tax-free savings account offered to children born between 1 September 2002 and 2 January 2011. They were introduced by the government to encourage parents and guardians to save for their children’s future. The government contributed £250 towards each Child Trust Fund account, or £500 for low-income households, on opening the account and then another £250 or £500 on the child’s seventh birthday.
New accounts are no longer available, as Child Trust Funds were replaced by Junior ISAs (JISA).
Up to £9,000 can be saved into an existing Child Trust Fund each year until the account matures. The financial year for a Child Trust Fund starts on a child’s birthday and ends the day before their next.
Anyone can deposit into a Child Trust Fund, including parents, grandparents and guardians.
The child named on the account can start to manage their Child Trust Fund from the age of 16. They will gain full access to the account once they turn 18 and can start to withdraw money or move their savings to another type of account.
There are three types of Child Trust Fund accounts:
- Cash Child Trust Funds: Hold cash and pay interest on the total amount of savings.
- Stakeholder Child Trust Funds: Invest money on the stock market with additional rules such as a maximum charges cap.
- Shares-based Child Trust Funds: Invest in stocks and shares but without additional stakeholder CTF rules.
Finding a lost Child Trust Fund
With one million Child Trust Fund accounts estimated to be missing, you are not alone if you think you’ve lost the details for one.
Tracking down an account is really simple: you can trace a lost Child Trust Fund online by submitting a request form on Gov.uk.
You will need a Government Gateway ID and password before you can fill out the form. It only takes a few minutes to set up an account if you don’t already have one.
If you are a parent or guardian looking on behalf of your child, you will need one of the following details:
- The child’s unique reference number (which can be found on the annual Child Trust Fund account statement).
- The child’s National Insurance number.
If you are looking for your own trust fund, your National Insurance number is all you’ll need.
HMRC usually sends a response about your account within three weeks of your request.
Don't worry if you can't find your unique reference number or don't have a National Insurance number, you should still be able to submit a request through Gov.uk, while some Child Trust Fund providers offer an online search tool.
Should you transfer a Child Trust Fund to a Junior ISA?
Child Trust Funds were discontinued in 2011 and replaced by Junior ISAs. A Junior ISA is a tax-free savings account for children under the age of 18.
It is important to note that you can only transfer a Child Trust Fund to a Junior ISA before a child turns 18. Once the Child Trust Fund matures on their 18th birthday, they will have to transfer the money to another savings product, such as an adult ISA.
There are two types of Junior ISAs for children:
- Cash Junior ISA: Only lets you save cash.
- Stocks and shares Junior ISA: You can invest in stocks and shares without paying tax on the capital or dividends you receive.
Your child can open one or both types of Junior ISA. In the 2021/22 tax year, up to £9,000 can be saved into a Junior ISA and anyone can pay into the account. This £9,000 limit is across all JISA product types your child may have and not per account.
It may be worth transferring a Child Trust Fund to a Junior ISA if you are not happy with the interest you earn on the account or the provider fees are more than you want to pay.
If your child’s Child Trust Fund is invested, then check whether there will be any exit fees if you transfer.
Junior ISAs tend to pay higher interest and there is more product choice available.
What happens when a Child Trust Fund matures?
A Child Trust Fund matures when a child turns 18. This means that they will have total control over the money in the account.
Although it may be tempting to spend the cash, a Child Trust Fund could be a great first step towards long-term financial goals, such as:
There are several savings products that could help young savers once they turn 18 years old:
- Cash ISA: A cash ISA is a tax-free savings account that lets you save up to £20,000 each financial year.
- Stocks and shares ISA: Stocks and shares ISAs allow you to save up to £20,000 in investments in each financial year tax-free. You can also combine a cash ISA with a stocks and shares ISA up to £20,000.
- Lifetime ISA: A Lifetime ISA (LISA) is a tax-free savings account designed to help people who are 18 and over but under 40 save for retirement or to buy their first home.
- Savings accounts: There are lots of different types of savings accounts, including easy access and regular accounts, that let you earn interest on your money.
WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.
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Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more