Nearly 2million lost child trust funds have never been touched – is your kid missing out on thousands?
AROUND 1.9million child trust funds (CTFs) have never been opened by parents meaning kids could be missing out on a windfall of thousands.
According to paperwork dug up by The Sun, three in 10 parents or guardians failed to open a CTF for their child even though they were eligible to do so.
Under the CTF scheme, parents were issued two vouchers each worth £250; one when a child was born between September 1, 2002 and August 2, 2010, and another when they reached seven.
From August 3, 2010 until January 2, 2011, parents were issued one voucher worth £50 when children were born.
Parents on low incomes - as decided on by the Government using a - were entitled to double these payouts.
They could then use the voucher to open one of three types of CTF; a stakeholder account, a share account or a cash account.
How do I find a lost child trust fund?
IF you've lost a child trust fund. Here's how to trace it:
Some parents or guardians may have never opened a CTF for their children.
But HMRC will have opened a default account in the child’s name.
Parents can find out where their child’s account is by completing a .
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 CTF has been found, parents or guardians can switch from the stakeholder account HMRC set up to a .
But where parents failed to cash in their vouchers within a year, HMRC opened an account on their behalf - and invested the money.
The Sun has found that in total, 6.3million accounts were opened - 4.4million of these by parents on behalf of kids, leaving 1.9 accounts "secret accounts".
In August, the first children eligible for child trust funds started turning 16, which means they can start taking control of their accounts themselves.
Before this time, the account must be managed by a parent or guardian and only once they reach 18 can kids withdraw the money.
And those with children aged seven to 16 could have a "secret" account that may contain lots of cash.
So how much could children have?
The amount will vary based on whether parents have invested or saved in cash for their children or if it was an account opened on their behalf by HMRC.
OneFamily, which said it's the largest CTF provider looking after one in four accounts, reckons the average amount held in one of its CTFs set up for children born in 2002 is £2,175.
But these secret accounts opened by HMRC, known as "stakeholder" accounts, are mainly made up of index tracking funds, which follow the fortunes of companies in the FTSE 100 or FTSE All-Shares, for example.
These tend to charge the maximum fee of 1.5 per cent of the total amount held in the account.
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 £4,260 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 CTF 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.”
The L&G International Index Child Account, offered through Hargreaves Lansdown, for example, has seen 75 per cent growth between 2013 and now with 0.45 per cent fees.
Danny Cox, an investing expert at financial provider Hargreaves Lansdown says the performance of these default accounts has been “dire”.
He said: "The performance has been dire. In large, this is because the cost is 1.5 per cent when global trackers can now cost around 0.5 per cent including platform fees."
This means it’s vital parents check if their children have an account and that they consider transferring the money in it to a Junior Isa.
With a Junior Isa, you can decide whether to continue investing in the stock market or plump for a cash savings account (see the box out below for more information.)
More on money
We reported in August, that children turning 16 could soon be in line for a Child Trust Fund windfall worth thousands.
Here are the best ways to save for kids and get up to 4.5 per cent interest.
Here are our top tips for teaching your children the value of money.
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