From this Saturday, 1 September, children turning 16 will be able to take control of their child trust fund (CTF), although they won't be able to draw any money out until they reach 18. CTFs were tax-free vehicles launched in 2002 to encourage saving, and were available to all children born between 1 September 2002 and 2 January 2011. The government added a £250 voucher at birth (£500 for families who received the child tax credit), and a second £250 or £500 voucher for children who turned seven before 1 August 2010. Parents can still add up to £4,260 a year to a CTF and the accounts now have a combined worth of £9.3bn.
Addressees come back again
CTFs were replaced by junior individuals savings accounts (Jisas) in January 2011, by which time more than six million CTFs had been opened and had received government top-ups. However, crucially, they weren't automatically transferred to Jisas. Now, as many as one million CTFs are classed as "addressee gone away", reports Patrick Collinson in The Guardian, meaning the accounts have been lost or forgotten about. With up to £1,000 of government money plus interest or dividends sitting in these accounts, it is worth checking if your child has a CTF £250 deposited with Santander on the day the scheme launched is now worth £318.50, says Collinson.
Track down your lost funds
If you want to track down a lost CTF, you need to contact HMRC via Gov.uk/child-trust-funds. Once you have submitted your request, HMRC promises to get back to you within 15 days.
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Even if your children are still far from their 16th birthdays, it is worth hunting down their CTFs now. Some children will have more than a decade left until their CTF matures and it might not be earning the best return.
A CTF can be transferred into a Jisa, but whether you should bother transferring yours depends on whether you have a cash or an investment CTF. Cash CTFs don't pay as much interest as Jisas, so it is worth transferring your money. Coventry Building Society currently pays the best rate on Jisas at 3.5%. However, if you have an investment CTF then you'll need to look at the fees including transfer fees and compare Jisa providers before you transfer. Beware: once you switch, you can't switch back.
Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings and credit cards to pensions, property and pet insurance.
Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.
Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping among many other titles both online and offline.
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