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Teenagers risk missing out on savings pots

Teenagers risk missing out on savings pots
Teenagers risk missing out on savings pots

Anyone turning 16 from now can start managing their Child Trust Funds for the first time - although some may be unaware that they have these savings.

These funds were set up by the Labour government in 2005 to encourage parents to save for their children and to promote financial awareness.

They began with an automatic contribution from the government.

Campaigners worry that hundreds of thousands remain unaware of the money, which would total hundreds of pounds.

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Initially, the government provided a £250 voucher in the child's first year and the same amount again when they reached the age of seven, to be invested in cash or stocks and shares on the child's behalf until he or she turned 18. Children born from September 2002 were eligible.

If the child was born into a family with a low household income then the payments totalled £500.

In August 2010, those sums were reduced to £50, or £100 for those in low-income homes.

These stopped entirely in January 2011 during the coalition government, but in the meantime six million young people were assigned these savings, which could be topped up by their family, friends or the children themselves.

These accounts remain, although some people would have switched them into Junior Isas.

September marks 16 years since eligibility for the first funds began and, under the rules, anyone turning 16 can apply to take over the management of their fund from their parents, their carers, or the UK tax authority.

Although they are unable to withdraw these savings until they turn 18, they will still be able to manage their account such as choosing which provider oversees their investment. An estimated 75,000 youngsters will turn 16 in September alone, giving them the opportunity to do so.

However, more than one million of these funds are "lost" to the youngsters who are supposed to benefit from them, according to Gavin Oldham, chairman of the Share Foundation, which administers Child Trust Funds for children in care.

He said that these funds - including about 440,000 for children from disadvantaged backgrounds - were opened almost entirely by HM Revenue and Customs on the children's behalf, when their parents had not done so within the first year of their birth.

They would probably have received a letter when the fund was set up, but may have ignored it or moved away. Typically, the fund is now worth £1,600.

"There should be a special effort from the government to re-link these [funds] to the young people to whom they belong," he said.

HMRC has a dedicated service to help people find out where their Child Trust Fund is held.

The tax authority wrote to parents as their child became eligible for a Child Trust Fund and, after that, any communication should have been between them and the provider of the trust fund account.

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