Could your child be sitting on long-forgotten savings?
Do you remember Child Trust Funds? Or are you among the estimated two million or so parents who seem to have forgotten all about them? If so, you – and your child – could be missing out on valuable savings.
Child Trust Funds
The government launched Child Trust Funds as an incentive for parents to start saving early for their children. They were long-term, tax-free savings accounts into which the government made two initial contributions, but which could be topped up by further payments from parents, grandparents or friends.
Any child born between the 1st of January 2002 and the 2nd of January 2011 qualified for receipt of the government payments – as a form of a publicly-funded endowment for the child's future. The first payment of £250 (or £500 for more impoverished families) was made at birth and the second – of the same amount – paid on the child's seventh birthday. The government "endowment" was therefore worth as much as £500 to £1,000.
Additional contributions could be paid into the savings accounts by family or friends, up to a maximum of £4,368 a year.
The government’s intention was to kick-start a habit of saving on the part of parents for their child’s future – especially for the payment of university or other fees when that time came.
Children born since the 2nd of January 2011 no longer receive the government contributions, and it is no longer possible to set up a new Child Trust Fund – although you may continue to use an existing Child Trust Fund just like any other savings account, up to the maximum personal contributions of £4,368 a year.
Just as the name suggests, Child Trust Funds are savings accounts held in trust and effectively locked away until they reach the age of 18, when they take full responsibility for and ownership of the savings.
A story in the Mirror newspaper last month revealed that almost 2 million original beneficiaries of Child Trust Funds may have overlooked or completely forgotten about the accounts that were opened when they were born.
The initial government contributions were made by way of a savings voucher, which needed to be paid into a Child Trust Fund provider. If the family subsequently moved house, the provider might not have been updated with the change of address, and the provider’s contact details – along with the account itself – might have been forgotten.
For some, 17 years have now passed and the creation of a Child Trust Fund – especially if no parental contributions were subsequently also made – is now long forgotten.
Yet those forgotten about savings might be worth millions of pounds. The Mirror cites as an example someone now aged 17, for whom a minimum of £10 a month continued to be saved in his or her Child Trust Fund would now have savings in it worth £3,610.
Finding your lost Child Trust Fund
HM Customs & Revenue (HMRC) offers a tracking tool to help you trace lost Child Trust Funds and their providers:
- you need to use a “Government Gateway ID” – which you might have already, if you have filed a tax return online, applied for a driving licence, or made similar applications, or you may create one when you visit the website;
- you will then be asked for your personal details, including your address and telephone number;
- then complete the details of the child concerned, giving their name and date of birth;
- HMRC typically gets back to you within about 15 days – or might contact you by post or by telephone if they need further details;
- you will then be given the name and contact details for you to contact the relevant provider of the Child Trust Fund.
Although you can no longer open a new Child Trust Fund, it may still be a good idea to begin the foundations of savings for your child – and the current incarnation of a very similar vehicle is the Junior ISA (or Junior Individual Savings Account).
Junior ISA’s are similar to Child Trust Funds in so far as being able to add up to £4,368 a year to each account. This may be a simple cash account or an investment account (containing stocks and shares). In either case, the Junior ISA locks away the savings until your child attains the age of majority at 18.
Since the 6th of April 2015, it has been possible to transfer the balance of any pre-existing Child Trust Fund directly into a Junior ISA as your alternative long-term, tax-free savings account for the child. A Child Trust Fund and a Junior ISA may not be held at the same time in respect of any one child.
In other respects, your decision to open a Junior ISA may need to take into account the factors necessary for any other type of ISA – namely the rate of interest the provider offers you.