Hundreds of millions of pounds held in child trust funds (CTFs), which people can access when they reach 18, are at risk of being forgotten.
The savings scheme ran between 2002 and 2011, and the Government paid £2 billion to these tax-free savings funds.
However, once the scheme was withdrawn, the level of awareness meant that many holders were not aware of the accounts.
Spending watchdog The National Audit Office (NAO) estimates show that more than a quarter of CTFs have remained untouched for a year or more after their owners turned 18.
No tax to pay
A CTF is a savings account for children born between 1 September 2002 and 2 January 2011, which they can access at the age of 18.
There’s no tax to pay on the income or any profit it makes. It will not affect any benefits or tax credits savers receive.
The Government paid billions of pounds into CTFs for 6.3 million children born during this period.
The funds help people financially in early adulthood – but the NAO is concerned that accounts are at risk of becoming forgotten or lost track of by the account holders.
Awareness campaign
Gareth Davies, Head of the NAO, said: “At a time of economic hardship for millions of people across the country, it is important the Government does enough to make sure young people are aware of, and can access, their child trust funds.”
HMRC plans to run an awareness campaign targeting young people to remind them to access their child trust funds in 2023.
What happens on the 18th birthday?
The child, an now adult, automatically takes over the account, but no more money can be added.
Options available to savers include:
· Withdrawing the money; or
· Transferring the money to an adult ISA.
The CTF will then close. Until the child withdraws or transfers the money, it stays in an account that no one else has access to.
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