The average holding is worth a staggering £1,911, yet many don’t even know the money is there and risk letting it go to waste.
Now experts are urging families to track down the cash, which still belongs to them and can be put to good use.
Millions of young Brits have money invested on their behalf through a long-term, tax-free savings account known as the child trust fund, or CTF.
Around 6.3million tax-free CTFs accounts were set up for children born between September 1, 2002 and January 2, 2011. Children born after those dates got a junior Isa allowance instead.
The government automatically set up a CTF for every child born in the UK, in a bid to help them build up a pool of money and get a financial head start in life.
Originally, each child received a free government-funded voucher worth £250, which was increased to £500 for lower income families.
CTF holders got a further top up at seven, although these free payments were scaled back in August 2010.
Some 1.8million children whose parents didn’t actively set up a CTF got one anyway and will have enjoyed years of investment growth on those government vouchers.
Family and friends could make annual contributions on top, with all the money belonging to the child at age 18.
Some children could have tens of thousands of pounds if parents pumped money into their CTF year after year, especially if it was invested in the stock market.
The first wave of CTFs matured in September 2020 and more accounts mature every day, yet in more than half of cases the money is sitting unclaimed.
In total, an incredible £394million is going begging and that figure is set to grow and grow.
Today, a staggering £9.7billion is sitting in CTFs. If half of that continues to go unclaimed the nation’s young adults could miss out on £5billion of free cash.
The average holding is worth a £1,911 yet families are failing to take what belongs to them, the National Audit Office has warned.
Many parents and children aren’t aware they even have a CTF, or don’t know where the money is or how to track it down, said Laura Suter, head of personal finance at AJ Bell.
“More than a quarter of CTF accounts were set up by the government, because parents failed to do so within the 12-month window.”
Many are unclaimed as the parents either weren’t aware or won’t remember that their child had an account, let alone where the money is today.
Suter said that eligible children can track their CTF by visiting government portal Gov.uk. “You can fill in a form to trace the money, although you first need a government gateway ID.”
Even if parents didn’t make any contributions the initial government payment could have grown to a decent amount, she said.
“A £250 investment in the FTSE 100 at the start of 2006 would be worth £640 today, before charges, while £500 would have grown to £1,281.”
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This pot of free cash could be a huge help for young adults who could put it towards university fees, a new car or even a property deposit.
Suter warned that many CTF providers impose hefty charges that earn them an incredible £100million a year, a figure that will increase as CTFs continue to rise in value.
“For many families, it will make sense to transfer it to a Junior Isa, where the money can continue to grow free of tax. Charges are likely be lower and you’ll have a much bigger investment choice.”
Suter added: “If you’re transferring the CTF you need to move over the entire sum of money to a Junior Isa, as you can’t have both types of account open at once.”
The sum you transfer won’t count towards your annual Junior Isa limit, so you can still add up to £9,000 to it in the same tax year.
If the CTF beneficiary has turned 18 the money can be moved into an adult Isa, with all its tax advantages intact.
Any child who thinks they are eligible for the CTF should track it down, even if they’ve never heard of it before today.