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Over £1bn unclaimed in child trust funds: how to check if you're missing out on a windfall
Average amount sitting unclaimed in a CTF tops £2,200
More than £1.4bn is sitting unclaimed in child trust funds (CTFs), with thousands of young adults missing out on an average of £2,200.
CTFs were opened for every child born between 2002 and 2011, with the government depositing £250 in each and adults allowed to pay in up to £9,000 a year, tax-free.
Children can withdraw the money at 18, but because the accounts were set up automatically, many have been forgotten about.
If you think you could be sitting on a windfall, read on for our advice on how to track dormant accounts down.
What are child trust funds?
Child trust funds were introduced in 2005, but were scrapped six years later. During that period, an estimated 6.3 million accounts were opened for children born between 1 September 2002 and 2 January 2011. There are three types of CTF: cash, stakeholder and shares-based.
The aim of these tax-free funds was to encourage young people to become future savers. As an incentive, the government deposited £250 in each, with those in low-income families or local authority care receiving an additional £250.
Anyone – parents, family and friends – can pay in up to £9,000 a year until the account reaches maturity when the child turns 18. At this point, they can either withdraw the funds or reinvest the money into another savings product.
If nothing is done with the money the CTF provider will transfer it to an Isa, if they offer one. Otherwise, the funds will be transferred into a tax-free 'protected account' until the account holder gives further instructions.
The scheme was scrapped in January 2011 and was replaced with the Junior Isa.
- Find out more: best children's savings accounts
£1.4bn remains unclaimed
The average amount sitting unclaimed in a dormant CTF is £2,212, a tidy sum for a school leaver who may be starting university, an apprenticeship or even their first job.
New HMRC figures show there were 671,000 matured CTFs that had not been transferred to an adult Isa or paid out to young account holders as of April 2024. Known as ‘continuing CTFs’, they represent nearly £1.4bn of unclaimed cash, a jump from £1bn the previous financial year.
The first CTFs started maturing in autumn 2020, with the oldest children who still haven’t claimed their pot of cash or transferred their account turning 22 this month. The youngest CTF savers are around 13, meaning CTFs will continue to pay out until 2029.
How to track down lost CTFs
Tracking down an account is relatively straightforward. If you don’t know the account details, you can ask HMRC to find the CTF provider by filling in an online form. To do this, you'll need to set up a Government Gateway account and follow these steps.
HMRC will send you details of the CTF provider by post within three weeks of receiving your request.
Alternatively, the Share Foundation, a charity working with the government to help young people to find their accounts, can also help you find a CTF. You might find this useful if your provider has changed, or if you grew up in care.
However, watch out for third-party agents offering to search for CTFs on your behalf. These companies will always ask you to pay a fee for their services. HMRC has warned that some charge up to £350 or 25% of the value of the savings account.
Using an agent can significantly reduce the amount received, is likely to take longer and customers still need to supply the agent with the same information they'd need to do the search themselves.
Should you open a Junior Isa?
From the age of 16, a child can legally take over responsibility for their CTF and make decisions about the fund – such as switching to another provider, or transferring to a Junior Isa (Jisa). However, they can't withdraw any money until they turn 18.
Parents may want to switch their child's savings before then to take advantage of higher interest rates and a wider choice of providers in the Jisa market.
A Jisa allows parents to save up to £9,000 for their child every year, without paying a penny to the tax man. Similar to adult Isa accounts, you can choose between opening a cash product or investing in stocks and shares. Either way, the money is locked away until a child turns 18 – at which point it converts to an adult Isa and the young person has full control over the money.
For an idea of the top rates currently available on restriction-free Junior cash Isas, take a look at the table below:
| Account | AER | Terms |
|---|---|---|
| Bath Building Society Junior Cash Isa | 5.49% | £1 minimum deposit |
| Beverley Building Society Junior Cash Isa | 5.2% | £1 minimum deposit |
| Loughborough Building Society Junior Isa | 4.8% | £1 minimum deposit |
| Nottingham Building Society Junior Isa | 4.75% | £1 minimum deposit |
| The Stafford Building Society Junior Isa | 4.75% | £1 minimum deposit |
Source: Moneyfacts. Correct as of 30 September 2024, but rates are subject to change.
Rates on cash Jisas are high, with all products on the market offering interest above the current rate of CPI inflation (2.2%) and the top rate almost three times more. You might want to hurry to grab one of these deals, however, as rates on other types of savings accounts have started to tumble.
Parents wanting the best returns should consider opening a stocks and shares Jisa instead. These are more suitable for long-term growth, despite dips in the markets meaning your balance will drop on occasions.
To transfer to a Junior Isa, you'll need to ask the Isa provider for a Junior Isa transfer form, and provide the CTF details. Once you've submitted this to your new Junior Isa provider, it will carry out the switch for you. The switch should be completed within 30 days, and the CTF will then be closed.
- Find out more: best Junior Isas 2024
How else can you save for a child's future?
If you've used up your child's tax-free options or you want to access the money before they turn 18, banks and building societies also offer non-Isa savings accounts for children.
Children can open most of these accounts themselves from age seven, so it's a great way to get them involved.
Watch out for catches such as introductory bonuses, limits on withdrawals, maximum or minimum account balances, and investment charges (if you opt for a stocks and shares account).
Providers often offer free gifts such as a piggy bank, but don't be distracted. Focus on getting the best return, and check on the progress at least twice a year.
You could also consider options such as premium bonds, traditional investments or even saving for your child in a pension.
- Our guide on how to save for your children's future shows the pros and cons of each of these options.
