Thousands of young adults have been urged to check if they are sitting on a pot of unclaimed cash by HM Revenue and Customs (HMRC).
The tax collection department says that around 758,000 young adults have yet to claim their child trust funds, worth £2,240 on average.
These funds are long-term, tax-free savings set up for every child born between 1 September 2002 and 2 January 2011. The government deposited £250 in each, with those in low-income families or in local authority care receiving an additional £250.
Young people can take control of this account at 16 and withdraw funds when they turn 18. With interest, most grow to be worth much more than when they were set up.
Angela MacDonald, HMRC’s second permanent secretary and deputy chief executive, said: “If you’re between 18 and 23, you could be sat on a savings payout and not even realise it. Just search ‘find my Child Trust Fund’ on GOV.UK to find your savings account today.”
A child’s parent or guardian can also pay up to £9,000 a year into the account. Many still do this, but new accounts can’t be set up. Child trust funds were introduced by Labour under Tony Blair in 2005 and scrapped by the Conservatives in 2011.
They were replaced by junior individual savings accounts (ISAs), which are long-term, tax-free savings accounts for children. These accounts work similarly, except that the government does not give any money when they are set up.
The HMRC has issued the new advice to Gen Z adults who may have a child trust fund, as they or their guardians may have lost track of it or forgotten it was set up.
However, the department also advises against using third-party agents who offer to find child trust funds at a price. In extreme cases, they have been known to charge £350 or even 25 per cent of the value of the account for this.
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Instead, they advise young people to search ‘find your child trust fund’ on GOV.UK or use the free, approved tool from the Share Foundation, which requires just a few details.
Shelley Doorey-Williams, CEO of the London Foundation for Banking and Finance, said the group “welcomes HMRC’s call for young people to claim their Child Trust Fund savings”.
She added: “It’s encouraging to see the government making efforts to reunite people with money they may not even realise was theirs. With an estimated average of £2,242 waiting in unclaimed accounts, this is real money at a crucial time, that can help young people right at the start of their financial lives.”
Once the funds have been accessed, there are several options for what to do with them. Charlene Young, a pensions and savings expert at AJ Bell, said: “Once you’ve tracked down the money, you can choose what to do with it. Your options are to transfer it to an adult ISA or withdraw the money.
“Until then, your money will just sit in an account that no one else has access to, possibly paying very high charges.
“Anything you transfer to an adult Isa at maturity will not count towards your annual Isa allowance, which is £20,000 for over-18s.”
